Common TFSA Questions
Here are some commonly asked questions about the TFSA, with generalized answers. For more information, please visit the Canada Revenue Agency’s website.
Q: How old do you have to be to set up a TFSA.
A: The minimum age to open a TFSA account in Canada is 18 years old.
Q: If I do not contribute to my TFSA during the year, can I contribute those funds later on.
A: Yes. As soon as you turn 18, you automatically begin accumulating contribution room even if you have not opened the account. For example, if you open a TFSA when you are 22, you would be eligible to contribute funds for the past four years. This also applies if you skip a year once you have opened the account. Any contribution room you did not use for one year will be added to the limit in the following year.
Q: What types of assets can I hold in my TFSA.
A: TSFA’s can hold Cash, GICs, Stocks, Bonds, Mutual Funds, and ETFs. TFSAs cannot contain physical cryptocurrency or precious metals such as gold. However, it is possible to purchase a gold or Bitcoin ETF and hold that in your TFSA instead.
Q: Can I hold US securities in my TFSA.
A: Yes. You can any US securities listed on US exchanges in your TFSA. However, remember that you will likely be charged a foreign exchange fee when you purchase US securities with Canadian dollars. However, to avoid constant currency conversion fees, it is possible to open a US dollar TFSA. This account operates in the same way as a Canadian dollar TFSA, except it holds US dollars. However, it is essential to note that your contribution limit does not change if you open a second TFSA. So, suppose you have a $6,000 contribution limit and deposit $6,000 into your Canadian dollar TFSA. In that case, you cannot deposit additional funds into your US dollar TFSA.
Q: If I withdraw money from my TFSA, can I put it back in.
A: Yes. If you withdraw any funds from your TFSA, you can re-deposit those funds into your TFSA the following year. However, it is important to note that you cannot deposit more than your contribution limit for the year, even if you withdraw money.
For example, suppose that on January 1st, you start the year with a TFSA contribution limit of $6,000. Then, in February, you receive a cheque for $6,000 and deposit it into your TFSA. At this point, you have reached your TFSA contribution limit for the year and cannot deposit any more funds. So, even if you withdraw $20,000 in March, you cannot re-deposit this amount for the rest of the year as you already reached your limit in February. However, this $20,000 will be added to the following year’s contribution limit.
Q: Can I deposit or withdraw money from my TFSA whenever I want?
A: Yes. Money can be deposited into your TFSA at any point during the year as long as you do not exceed your contribution limit for the year. Similarly, you can withdraw your TFSA savings at any point during the year.
Q: Can I spend the money in my TFSA on anything I want?
A: Yes. There are no limits or restrictions on how you spend your TFSA savings. Once you withdraw the money, it can be spent on anything.
Q: Do I have to pay taxes on any of the money in my TFSA.
A: No. Any of the gains on the assets in a TFSA are not taxable. This includes any dividends earned.