Making or replacing withdrawals from a TFSA (2024)

FAQs

Can TFSA withdrawals be replaced? ›

If you decide to replace or re-contribute all or a part of your withdrawals into your TFSA in the same year, you can only do so if you have available TFSA contribution room. If you re-contribute but do not have contribution room, you will have over-contributed to your TFSA in the year.

You can withdraw funds from your TFSA any time you want¹ and you don't have to reach a certain age before you withdraw your money. Withdrawals made from your TFSA will be added back to your TSFA contribution room the following year. Your financial institution can help you make withdrawals from your TFSA.

Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn. Administrative or other fees in relation to a TFSA and any interest on money borrowed to contribute to a TFSA are not tax-deductible.

There is no limit on when or how much you can withdraw from your TFSA. Generally, any amount you contribute and any income earned in a TFSA is tax free, even when withdrawn. Withdrawing funds from your TFSA will not reduce the total contribution you have made for that year.

You can withdraw from your TFSA without losing contribution room, and recontribute withdrawn amounts in the following years. While TFSA withdrawals typically aren't taxed, penalties might result if you over contribute or if a non-resident makes a deposit.

If you want to transfer funds from one TFSA to another or from one issuer to another, there will be no tax consequences if your issuer completes a direct transfer on your behalf.

It also means that starting on January 1, 2024, eligible Canadians will now have a cumulative lifetime TFSA contribution limit of $95,000 (see “What is the lifetime contribution limit for TFSA?” below for examples and charts).

Yes, you can lose money on a TFSA, but it is easy to avoid losing your money. Typically, people who lose their money on a Tax-Free Savings Account are people who are using it for more volatile investments or people who are over-contributing.

You do not report your TFSA contributions on your tax return. To check your TFSA contribution room, you may use CRA's My Account service online. The TFSA information reflects contributions and withdrawals made up to the date indicated by CRA.

Can you write off losses in TFSA? ›

Investments held in registered accounts such as TFSA or RRSPs aren't subject to capital gains taxes and can't be claimed as capital losses. Investments go up, investments go down – but if you sell your investments at a loss, you can claim a portion of your capital loss on your income tax return.

So, while $40,000 to $50,000 might be the average, plenty of folks are working on growing that balance as they approach their retirement years.

There are some specific examples of when the CRA would ask you to pay tax on income earned inside the TFSA. This includes prohibited and non-qualified investments, for example. should you make a contribution while you are not a resident of Canada, or if your account contributions are in excess of your limit.

Unlike RRSPs or some other tax-advantaged accounts, there's no CRA penalty for withdrawing money from your TFSA. The only withdrawal fee you might get hit with is one from your financial institution, since some banks will charge you a fee to withdraw or transfer your TFSA to another provider.

If you want to transfer funds from one TFSA to another or from one issuer to another, there will be no tax consequences if your issuer completes a direct transfer on your behalf. For more information, contact your issuer.

“You generally have to withdraw the funds in the year you overcontributed or the following year,” Ball explains. “It will be a regular RRSP withdrawal. So the CRA would charge you withholding tax when you take the funds out. You'll be out the tax until you file your return.

You're allowed to open as many TFSA accounts as you like, as long as you stay within your contribution room between them. There may be times when you'll want to transfer funds or investments from one TFSA to the other.