TFSAs

By Robb Engen, QAFP on June 25, 2025
Estimated reading time: 7 minutes

By Robb Engen, QAFP on June 25, 2025
Estimated reading time: 7 minutes

The tax-free savings account is a great wealth-building tool, but it’s sadly misunderstood. Here are seven TFSA features Canadians should know.

After 15 years of conversations with blog readers and financial planning clients, I’m still amazed at how often the same myths about tax-free savings accounts (TFSAs) pop up.

I’ve had clients ask if a dividend paid inside their TFSA counts as a contribution. Others think they lose contribution room when they make a withdrawal, or that a TFSA is only for short-term savings. These aren’t outliers; they’re everyday Canadians trying to do the right thing and getting tripped up by the most misunderstood account in the country.

Since its introduction in 2009, the TFSA has become a core part of financial planning. But despite its popularity, misconceptions abound—and they’re costing Canadians real money.

Below are the seven questions I field most frequently, each introduced with an anonymized client situation so you can see how the myth shows up in practice—and how to handle it.

Client scenario:
Sarah holds $80,000 of the Vanguard All-Equity ETF (VEQT) in her TFSA. In January, she notices a $1,200 cash dividend and emails me: “Did I just use $1,200 of contribution room?”

Answer: No. Investment income from dividends, interest or capital gains has zero impact on your contribution room. The room is created only by government-set annual limits unused space from past years withdrawals made in a prior year. Growth inside the TFSA is completely tax-free and does not reduce future contribution capacity.

Client scenario:
Mike, 35, has never contributed to a TFSA. After selling a rental condo, he wants to deposit $50,000 but worries that it breaks the rules.

Answer: TFSA contribution room is based on your age—you start accumulating it in the year you turn 18. Unused room carries forward forever, and........

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