Canadians took nearly $70 billion out of Tax-Free Savings Accounts in 2024. That figure comes from Canada Revenue Agency data reported by The Globe and Mail. Roughly one-third of TFSA holders aged 25 to 45 made at least one withdrawal that year, higher than the overall average. People in their late 20s and early 30s averaged about 7.5 withdrawals each. The money comes out tax-free, but the contribution room does not return until January 1 of the following year. Putting it back sooner, without other unused room, creates a 1 per cent monthly tax.
Those numbers line up with the years when housing, childcare, and ordinary bills tend to press hardest. The Canada Revenue Agency does not ask why the money left. The rules stay the same whether the withdrawal covers rent, groceries, or something else.
You can take money out of a TFSA at any time and in any amount, as long as the account holds something the institution can move. There is no age limit and no withholding tax. The withdrawal is not added to your taxable income. Growth that happened inside the account before the money left is not taxed either. Only the actual dollars that leave the account affect your contribution room.
The amount does not free up space right away. It is added back to your available contribution room on January 1 of the following year, at the same time as the new annual dollar limit. Withdraw $5,000 in March 2026 with no other unused room, and that $5,000 does not become available again until 1 January 2027. Putting the same amount back in during 2026 creates an excess contribution. Excess amounts are taxed at 1 per cent per month for each month the excess remains in the account. The tax is calculated on the highest excess during each month.
Take $4,000 out in April to cover a bill. If you have no other unused room and put the same $4,000 back in June, the excess is taxed at 1 per cent for every month it stays in the account. The $4,000 only becomes available contribution room again on the following January 1.
If other unused room already exists, a re-contribution up to that amount is allowed in the same year. The restriction applies only to the room created by the withdrawal itself.
Because a TFSA withdrawal is not income, it does not appear on line 15000 of the tax return. It does not reduce eligibility for the Canada Child Benefit, the GST/HST credit, the Canada Workers Benefit, Old Age Security, or the Guaranteed Income Supplement. The same is true for Employment Insurance benefits in most cases. Some provincial programs may treat registered-account withdrawals differently, so those specific rules apply.
An RRSP withdrawal is treated as taxable income. The issuer withholds tax at source, and the full amount is added to taxable income for the year. That can affect income-tested benefits. The contribution room used for the original RRSP deposit is not restored by a withdrawal, except in limited cases such as the Home Buyers’ Plan or Lifelong Learning Plan. A TFSA withdrawal has none of those effects. TFSA contributions are not tax-deductible when they go in; RRSP contributions are.
Cash can usually be withdrawn immediately. Securities may need to be sold first, and settlement rules at the institution can add a business day or more. Direct transfers between TFSAs at different institutions are not counted as withdrawals and do not affect contribution room.
Financial institutions report all withdrawals to the CRA by the end of February of the following year. Until that update occurs, the contribution-room figure shown in CRA My Account reflects only prior-year information. The Canada Revenue Agency states that the most reliable figure comes from combining issuer statements with the official worksheet.
Younger holders withdrew more frequently but in smaller average amounts. Holders aged 65 and older withdrew less often — roughly 2.8 to 4 times a year on average — but in larger amounts. The data do not identify the purpose of each withdrawal.
The rules have stayed the same since the TFSA was introduced in 2009. The annual dollar limit changes with indexation; the treatment of a withdrawal does not. Anyone who has taken money out can calculate the exact room that will reappear on the next January 1 by adding the withdrawn amount to any remaining unused room and the new year’s dollar limit.
SOURCES: Canada Revenue Agency, The Globe and Mail.
