Back to Learn TFSA & Non-Registered

TFSA contribution room, in plain terms

The TFSA is the most flexible tax shelter Canadians have. Understanding how its room grows — and comes back — unlocks a lot of planning power.

How room accumulates

•Every year you're 18+ and have a SIN, you earn TFSA room — whether or not you open an account.
•The annual limit is $7,000 for 2025 (it rises in $500 steps with inflation).
•Unused room carries forward forever — someone who never contributed could have over $100,000 of cumulative room.

Withdrawals give room back

•When you withdraw from a TFSA, that amount is added back to your room the next calendar year.
•This makes the TFSA an ideal retirement income source: draw it down, then refill it later if you have room.
•Be careful not to recontribute in the same year you withdraw — that can trigger an over-contribution penalty.

Why it's a retirement superpower

•All growth and withdrawals are completely tax-free — no tax on income, no tax on gains, no tax on withdrawals.
•TFSA withdrawals don't count as income — so they don't trigger OAS clawback, don't reduce GIS, and don't raise your marginal rate.
•It's the natural place to park RRIF surplus and to draw from in years you want to keep taxable income low.

Use the TFSA in your plan

The Sequencer draws TFSA last (to keep income low) and reinvests surplus into it.