# TFSA Explained: 2026 Limit and Contribution Room > How a TFSA works in 2026: the $7,000 limit, $109,000 total room since 2009, how withdrawals add back and how to avoid the over-contribution tax. Source: https://trykosh.com/learn/tfsa-explained Guide - RRSP, TFSA and FHSA # TFSA explained: the 2026 limit, your total room and the rules that trip people up A Tax-Free Savings Account lets your money grow and come out without tax. The 2026 limit is $7,000, and someone who has been 18 and resident since 2009 has $109,000 of room in total. Here's how room builds, how withdrawals work and the one mistake that costs 1% a month. Updated October 31, 20264 min readBy the Kosh team On this page[What is a TFSA?](#what-is-a-tfsa)[What is the TFSA limit for 2026?](#limit-2026)[How do withdrawals work?](#withdrawals)[What happens if I over-contribute?](#over-contribution)[What should I hold in a TFSA?](#what-to-hold)[Newcomers and people leaving Canada](#residency)[TFSA or RRSP first?](#tfsa-or-rrsp)[FAQs](#faq) ## What is a TFSA? Despite the name, a TFSA isn't just a savings account. It's a registered account that can hold cash, GICs, bonds, funds, ETFs and stocks. You put in money you've already paid tax on, and everything it earns, plus everything you take out, is tax-free. Withdrawals don't count as income, so they don't affect benefits like the Canada Child Benefit or OAS. ## What is the TFSA limit for 2026? The 2026 annual limit is **$7,000**. Room builds every year from 2009 or the year you turn 18 while resident in Canada, whichever is later, and unused room carries forward. If you were 18 or older and resident in Canada in 2009 and have never contributed, your total room in 2026 is **$109,000**. TFSA annual limits and cumulative room since 2009 Year Annual limit Cumulative room 2009 $5,000 $5,000 2010 $5,000 $10,000 2011 $5,000 $15,000 2012 $5,000 $20,000 2013 $5,500 $25,500 2014 $5,500 $31,000 2015 $10,000 $41,000 2016 $5,500 $46,500 2017 $5,500 $52,000 2018 $5,500 $57,500 2019 $6,000 $63,500 2020 $6,000 $69,500 2021 $6,000 $75,500 2022 $6,000 $81,500 2023 $6,500 $88,000 2024 $7,000 $95,000 2025 $7,000 $102,000 2026 $7,000 $109,000 If you turned 18 later, add up the years from then. Someone who turned 18 in 2015 has $78,000 in 2026; someone who turned 18 in 2020 has $45,500, assuming they were resident in Canada throughout and never contributed. ## How do withdrawals work? You can withdraw any amount at any time, tax-free. The amount you withdraw is **added back to your room on January 1 of the next year**, not immediately. So the formula for your room in any year is: this year's limit, plus unused room from earlier years, plus whatever you withdrew last year, minus what you've contributed so far this year. **The re-contribution trap** Putting money back in the same year you took it out, without spare room, creates an over-contribution. This is the most common TFSA mistake, especially when people move money between banks by withdrawing and redepositing. Ask for a direct transfer between institutions instead; transfers don't use room. ## What happens if I over-contribute? Unlike an RRSP, there's no grace amount. The excess is taxed at **1% a month** on the highest excess in each month, until you withdraw it or new room absorbs it on January 1. The CRA will send you a letter and you may have to file a TFSA return. Withdraw the excess as soon as you notice. The CRA's figure in My Account is only as current as what your financial institutions last reported, usually once a year. Your own records of this year's contributions and last year's withdrawals are the reliable source. ## What should I hold in a TFSA? Because gains are never taxed, a TFSA is worth most when it holds things that grow. Keeping it in a low-interest savings account wastes the shelter on very little. That said, a TFSA is also a sensible home for an [emergency fund](/learn/how-much-emergency-fund-do-i-need) or short-term savings, as long as the money's purpose and the investment match: cash or GICs for money you'll need soon, a diversified portfolio for money you won't touch for years. Two cautions. Day trading inside a TFSA can lead the CRA to treat the gains as business income, which is taxable. And U.S. dividends paid into a TFSA usually have foreign tax withheld that you can't recover. ## Newcomers and people leaving Canada You accumulate room only for years you're resident in Canada and 18 or older. A newcomer gets the full annual limit for the year they become resident, but nothing for earlier years. If you become a non-resident, you can keep the account and withdraw, but new contributions while non-resident are taxed at 1% a month. See the [newcomers' money checklist](/learn/newcomers-to-canada-money-checklist). ## TFSA or RRSP first? If your income is modest, you might need the money before retirement, or you expect a similar or higher income later, the TFSA usually wins. If you're in a high bracket now, the RRSP's deduction is worth more. Many people use both. [RRSP vs TFSA](/learn/rrsp-vs-tfsa) works through the numbers. [Free tool**TFSA contribution room calculator**Add up every TFSA limit you've been eligible for since 2009, subtract what you've put in and add back past withdrawals to see the room you have today.](/tools/tfsa-contribution-room-calculator)[Free tool**Compound interest calculator**See how savings grow when interest earns interest, with a starting amount, monthly contributions and the compounding your account uses.](/tools/compound-interest-calculator) **Where Kosh fits** Kosh tracks the contributions and withdrawals in the statements you upload, so you see your real TFSA room, not last year's CRA figure, and it flags a re-contribution before it becomes a penalty. ## Frequently asked questions What is the TFSA limit for 2026? $7,000. If you have been 18 or older and resident in Canada since 2009 and have never contributed, your total room in 2026 is $109,000. When does TFSA room from a withdrawal come back? On January 1 of the following year. Re-contributing in the same year you withdrew, without unused room, is an over-contribution. What is the penalty for over-contributing to a TFSA? 1% a month on the highest excess amount in each month, for as long as the excess stays in the account. There is no $2,000 grace amount as there is with an RRSP. Do newcomers to Canada get TFSA room for past years? No. Room accumulates only for years in which you are 18 or older and resident in Canada. You get the full annual limit for the year you become resident. Does TFSA income affect benefits like OAS or the Canada Child Benefit? No. TFSA income and withdrawals aren't included in your income on your tax return, so they don't affect income-tested benefits or credits. ## Sources - [CRA: Calculate your TFSA contribution room](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributing/calculate-room.html) - [CRA: If you over-contribute to a TFSA](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributing/overcontribute.html) - [CRA: Withdrawing from a TFSA](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/withdraw.html) Written by the Kosh team and checked against the rules in force on October 31, 2026. This guide is general information, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. It is not registered with any Canadian securities regulator as an adviser or dealer, does not recommend specific securities, and does not hold your money or execute trades. Tax figures are estimates; confirm with the CRA or a qualified professional before acting. Investing carries risk. ## Upload your statement and Kosh does this for you. Kosh reads your bank, card and investment statements, estimates your federal and provincial tax and turns guides like this one into your own numbers and next steps. [Start free](/signup?via=learn-tfsa-explained)