TFSA rules for 2026: limits, room, withdrawals and mistakes

Updated November 2026

The Tax-Free Savings Account (TFSA) limit for 2026 is $7,000. Someone who was 18 or older and resident in Canada in 2009, and has never contributed, has $109,000 of room in 2026. Growth and withdrawals are tax-free, but contributions are not deductible.

$7,0002026 TFSA dollar limit
$109,000Total room 2009–2026 if eligible since 2009
1% a monthTax on any over-contribution

How the TFSA works

A TFSA is a registered account that can hold cash and investments. Any interest, dividends or capital gains earned inside it are generally tax-free, including when you withdraw them. Unlike an RRSP, you get no tax deduction when you put money in.

To open one you must be a resident of Canada for tax purposes, be 18 or older and have a valid Social Insurance Number. You do not need earned income. In provinces and territories where the age of majority is 19, you open the account at 19 but keep the room from the year you turned 18.

TFSA income and withdrawals do not affect federal income-tested benefits and credits such as Old Age Security, the Guaranteed Income Supplement, Employment Insurance, the Canada child benefit or the GST credit. That makes the TFSA useful for people who expect a low income in retirement.

TFSA limits by year

Room starts to build in the year you turn 18 (or the year you become resident, if later). Each January 1 the new year's dollar limit is added. Unused room carries forward with no time limit.

Annual TFSA dollar limits, 2009 to 2026
Year	Annual limit	Running total
2009	$5,000	$5,000
2010	$5,000	$10,000
2011	$5,000	$15,000
2012	$5,000	$20,000
2013	$5,500	$25,500
2014	$5,500	$31,000
2015	$10,000	$41,000
2016	$5,500	$46,500
2017	$5,500	$52,000
2018	$5,500	$57,500
2019	$6,000	$63,500
2020	$6,000	$69,500
2021	$6,000	$75,500
2022	$6,000	$81,500
2023	$6,500	$88,000
2024	$7,000	$95,000
2025	$7,000	$102,000
2026	$7,000	$109,000

Example: Priya turned 18 in 2020 and has never contributed. Her 2026 room is the sum of the limits from 2020 to 2026: $6,000 + $6,000 + $6,000 + $6,500 + $7,000 + $7,000 + $7,000 = $45,500.

Your room is shown in your CRA account, but that figure is updated only once a year, after financial institutions report the previous year's transactions (by the end of February). Check your own records before contributing, especially early in the year.

Withdrawals and the re-contribution trap

You can withdraw any amount at any time, tax-free. The catch is timing: the amount you withdraw is added back to your room only on January 1 of the following year, not right away.

Classic mistake. Marc has contributed the maximum every year, so on January 1, 2026 he has exactly $7,000 of room. In February he contributes $7,000, leaving zero room. In May he withdraws $5,000 for a car repair. In September he gets a bonus and puts the $5,000 back. That re-contribution is an over-contribution of $5,000, because the withdrawal does not create new room until January 1, 2027. He pays 1% a month on $5,000 ($50 a month) until he removes it, and must file a TFSA return.

If Marc had waited until January 2027, his room would have been $7,000 (2027 limit, if unchanged) + $5,000 (2026 withdrawal) = $12,000, and the re-contribution would have been fine. Moving money directly between your own TFSAs at different institutions is a "qualifying transfer" and does not count as a withdrawal or contribution; ask the receiving institution to arrange it rather than withdrawing yourself.

Over-contributions

Any excess amount is taxed at 1% per month for as long as it stays in the account. Withdraw the excess as soon as you notice it; do not wait for a letter from the CRA. You still have to file a TFSA return for the excess. Unlike the RRSP, there is no $2,000 cushion.

What a TFSA can hold

A TFSA can be a simple deposit account or GIC at a bank or credit union, an annuity contract with an insurance company, or a trust account holding investments. In a self-directed TFSA you can buy qualified investments such as stocks, bonds, mutual funds and exchange-traded funds (ETFs). The CRA warns that people who trade with the frequency and expertise of a professional can have the income taxed as business income. For investment basics, see investing and mutual funds.

US dividends. The Canada–US tax treaty exempts RRSPs and RRIFs from the 15% US withholding tax on US dividends. That exemption is not applied to TFSAs, so US dividends paid into a TFSA usually lose 15% at source, and you cannot recover it. Some investors hold US dividend payers in their RRSP and other investments in the TFSA for this reason.

TFSA or RRSP?

TFSA and RRSP compared
Feature	TFSA	RRSP
Deduction going in	No	Yes
Tax coming out	None	Taxed as income
Room returns after withdrawal	Yes, next January 1	No
Effect on OAS and GIS	None	Withdrawals count as income
Age limit	None after 18	Must close by end of the year you turn 71
2026 limit	$7,000	18% of 2025 earned income, max $33,810

As a rule of thumb, the RRSP tends to win when your tax rate now is higher than your expected rate in retirement, and the TFSA tends to win when it is the same or lower. See do you need an RRSP? and RRSP contribution limits.

Successor holder or beneficiary

What happens to a TFSA at death depends on whom you name, and the difference matters.

Successor holder: Only your spouse or common-law partner can be named. They become the new holder immediately, the account keeps its tax-free status, and the value at death plus later income stays sheltered. Their own TFSA room is not affected (as long as your account had no excess amount). They do not inherit your unused room.
Designated beneficiary: Anyone else (children, other relatives, a charity), or a spouse not named as successor holder. The beneficiary receives the value at the date of death tax-free, but income earned after death until payout is taxable. A surviving spouse named as beneficiary can put the payment into their own TFSA as an "exempt contribution" (Form RC240) without using room, within the rollover period.

Quebec does not recognise successor holder designations, and recognises beneficiary designations only for certain annuity-type TFSAs; there, the will governs. See estate planning.