Changes to your TFSA

The Canada Revenue Agency has announced the 2025 TFSA contribution limit

In 2025, Tax-Free Savings Accounts (TFSA) have an annual contribution limit of $7,000 per year, as confirmed by the Canada Revenue Agency.

Table of Contents

Tax-Free Compounding
Big and Growing Fast
Total TFSA Contribution Room
Five Reasons to Invest in a TFSA

The contribution limit is up from $6,500 in 2023, which makes it easier than ever to answer the question, "When is the right time to contribute to a TFSA?" The answer is today.

When TFSAs launched in 2009, the benefits and flexibility made them an essential part of a comprehensive investing strategy. Now, with a lifetime maximum of $102,000 and rising by $7,000 every year, all Canadians aged 18 and over need to consider a TFSA as an essential part of their plan.

The Power of Tax-Free Compounding

If you had contributed $0 before the recent increase, and then contributed $6500 per year for the next 10 years (from 2024 through 2034), your investment would have grown to $88,293 by 2034. But you can now contribute $7,000 per year for the next 10 years. If you did that, your investment could grow to $95,084 by 2034. That amounts to 8% more growth because of the recent TFSA changes.

On the other hand, let’s say you’ve been making the maximum TFSA contributions every year since TFSAs started in 2009. Before making your 2025 TFSA contribution, you’d have contributed $95,000 to your TFSA. If you contribute $7,000 per year for the next 10 years, your contribution of $165,000 would grow to $353,966 by 2035*.

Big and Growing Fast

Let’s put things into perspective. In 2009, $5,000 didn’t seem like a game-changing amount of money. Time told a different story as the TFSA contribution limit was gradually increased. With the 2025 TFSA contribution limit announcement, the total limit is $102,000. In 2035, it can reach $184,500 when indexed to inflation and rounded to the nearest $500 as calculated by the CRA.

Total TFSA Contribution Room

Cumulative TFSA Contribution Room +

2009	2015	2020	2025	2030	2035
$5,000	$41,000	$69,500	$102,000	$140,000	$184,000

+ FTSA Contribution room projected for 2025 through 2035 following an estimated 3% inflation rate and rounded to the nearest $500.

Since it’s always TFSA season, don’t forget to talk to us about increasing your pre-authorized contributions to ensure that you get the most out of your TFSA

Five Reasons to Invest in a TFSA

The deeper you look into the benefits of TFSAs the better they appear. Here are five reasons you should consider opening a TFSA or begin maximizing your contributions today.

Five reasons to Invest a TFSA

1. Reduce taxes on your investments
You can use your TFSA to shelter investments that would typically be taxed, because you don’t pay tax on investment earnings within a TFSA.

For example, if you’ve been eligible for a TFSA since they started in 2009, you will have total TFSA contribution room of $175,000** by 2034. That’s $350,000 per couple in just 10 years from now. And all of the earnings will be tax free!
Item Link List Item 1
2. Flexible savings strategy
If you withdraw money from your TFSA, you can invest the money again in a subsequent year. Better still, if you don’t have the money one year, you can carry forward any unused room.

For example, if you invest $3,500 in 2024, you can invest $10,500 in 2025 or carry forward the $3,500 to any future year.
Item Link List Item 2
3. No “clawback”
TFSA earnings do not affect your eligibility for federal income-tested benefits and credits.

No Old Age Security (OAS) clawback will be triggered by income or withdrawals. This is a big advantage for higher-income seniors.
Item Link List Item 3
4. Strategic withdrawals
A TFSA withdrawal may be more beneficial during a year when you have a higher marginal tax rate. Here’s an example. If you decide to go on an expensive vacation during one of your peak earnings years, you can use money from your TFSA to fund the trip.

That way, you’re using money that was taxed at a lower rate, and you won’t make an impact on the current year’s Registered Retirement Savings Plan (RRSP) contribution.
Item Link List Item 4
5. If your RRSP is maxed out
If your RRSP is full and you can’t contribute to it this year, a TFSA is a more tax-efficient option than a traditional “open” or “cash” account. In an open account, your earnings will be taxed each year. And if it’s interest income, it will be taxed at your highest marginal rate.

Not in a TFSA. No matter what kind of earnings you make in your TFSA, when you withdraw your money you do not pay taxes.

Item Link