Updated Checked by the Tax-Services.ca editorial team How we check
No. Money you take out of a TFSA is not taxable in Canada, and neither are the interest, dividends or capital gains earned inside it. What you withdraw is added back to your contribution room on January 1 of the next calendar year, not right away. The annual TFSA limit is $7,000 for 2026.
Is a TFSA withdrawal reported on your tax return?
No, in most cases. The CRA’s list of amounts that are not reported or taxed includes most amounts received from a TFSA. Income earned in the account is also generally tax-free. Contributions, on the other hand, are not deductible, so you get no deduction when you put money in.
When does TFSA room come back after a withdrawal?
Withdrawn room returns on January 1 of the next calendar year. If you take out $3,000 this year, your room does not go up by $3,000 until the start of next year. Investment losses inside the account do not count as withdrawals and never add room back.
What is the 2026 TFSA limit?
The TFSA dollar limit for 2026 is $7,000. The CRA says your room is the current year’s limit, plus unused room from earlier years, plus last year’s withdrawals, minus contributions already made this year. Your CRA account is updated only once a year, in spring, so it can lag behind your actual transactions. Check it against your own records and your financial institution’s, and use the TFSA calculator to work out how an account may grow.
What happens if you put the money back in the same year?
If you have no unused room, the money you put back is an over-contribution. Say you contributed the full $7,000 this year, withdrew $3,000 in June and re-deposited it in September. That $3,000 is over your room, and the CRA taxes the excess at 1% per month while it stays in the account, which is $30 a month here. The CRA says even an error counts. Waiting until January 1 avoids it.
Are there any other catches?
- Going over your room costs 1% a month on the excess.
- If the CRA decides you are running a business inside your TFSA, for instance through frequent, professional-style trading, the account can be deregistered and the income taxed as business income.
- Non-permitted investments held in the account are taxable too.
Deciding between accounts? The TFSA vs RRSP calculator compares them. For other payments, see the table on Is it taxable? and the income tax calculator.
Where does this information come from?
The rules come from the Canada Revenue Agency pages Tax-free savings account, Withdrawing from a TFSA, Calculate your TFSA contribution room, What is a TFSA and Amounts that are not reported or taxed. Checked in October 2026. This is an independent information site: we provide no services, we do not represent the CRA or any organization, and we do not guarantee that anything here is accurate or current. We accept no liability for decisions based on it. Check the official source before you rely on it. See the full disclaimer.
Frequently asked questions
Do I pay tax when I withdraw money from my TFSA?
No. The CRA lists most amounts received from a TFSA among the amounts that are not reported or taxed. The interest, dividends and gains earned inside the account are also generally tax-free, so a withdrawal does not need to go on your return.
When does my TFSA contribution room come back after a withdrawal?
On January 1 of the next calendar year. The withdrawn amount is added back to your room then, not at the time of the withdrawal. Putting the money back the same year only works if you have other unused room.
What happens if I put the money back in my TFSA the same year?
If you have no unused room, it is an over-contribution, taxed at 1% per month on the excess while it stays in the account. For example, $3,000 over your room costs $30 a month. Waiting until the next January 1 avoids it.
What is the TFSA limit for 2026?
The CRA gives the TFSA dollar limit for 2026 as $7,000. Your own room also includes unused room from earlier years and last year's withdrawals, minus contributions made this year. Check your records, since the CRA account updates only once a year.
Can income inside a TFSA ever be taxed?
Yes, in some cases. The CRA says frequent, professional-style trading in a self-directed TFSA can lead to deregistration, and the income may then be taxed as business income. Over-contributions and non-permitted investments are taxed as well.