Additonal Resources

Taxation of a TFSA

All amounts in the account are not taxable, except in the following cases:

If, at any time in a calendar month, there is an excess TFSA amount in your account, you will be subject to a tax of 1% of the highest such amount in that month;
If you, while a non-resident of Canada, make contributions to a TFSA, you will be subject to a tax of 1% per month on the amount you contributed. This will continue to apply for each month that the amount contributed remains in the TFSA and will continue to apply until the earlier of:
  • when the total amount is withdrawn and designated as a withdrawal in connection with the contribution from the account; or
  • when you become resident of Canada.

If property that is considered to be a prohibited investment or a non-qualified investment is acquired, or if property held in the account becomes such, a tax of 50% of the fair market value (FMV) of the property, at the time it was acquired or that it became a non-qualified or prohibited investment is payable by the holder. When a TFSA holds a prohibited investment, the holder will also be subject to an additional tax which is based on income earned from the prohibited investment.
  • In the case of a trusteed TFSA, the income earned in the account and paid to a beneficiary during the exempt period will be included in that beneficiary's income.

    Note
    If the income earned in the account during the exempt period is not paid out to a beneficiary during that period, it will be included in the trust's income in the trust's income tax return.


    If an annuity contract or a deposit ceases to be a TFSA, the account holder is deemed to have disposed of the contract or the deposit at FMV immediately before the contract or the deposit terminated. Earnings that accrue in the account after the holder's death will be taxable to the beneficiary of the account.
    When, for a calendar year, an advantage in relation to the TFSA is extended to the holder of the TFSA or someone who does not deal at arm's length  with the holder, the amount of tax payable by the holder is:
    • in the case of a benefit, the FMV of the benefit; and
    • in the case of a loan or a debt, the amount of the loan or debt.