Although tax-free, there is a limit to how much you can contribute to your TFSA every year. If you've opened a new TFSA in 2024 and have previously never contributed to a TFSA, you would have a total contribution room of $95,000, but this amount will be less if you turned 18 after 2009, have lived outside of Canada as an adult, or removed any money from your TFSA this year. There is usually an additional amount that investors can contribute to their TFSA each year (the annual TFSA dollar limit for the year 2024 is $7,000), though it is decided each year by the Federal government. If you’re not sure how much you can contribute, log in to the Canada Revenue Agency site to see the exact contribution limits or speak with a tax professional.

If you exceed your contribution limit, there is a financial penalty. Namely, you’ll owe 1% of the amount you’ve over-contributed every month until you withdraw the excess or become eligible for more contribution room. For example, if you over-contributed $100, you would have to pay $1 per month until you corrected the situation.

You can withdraw money from a TFSA without paying taxes, however, withdrawals impact your ability to contribute to your TFSA in the future.

You can learn more about withdrawing from a TFSA here.