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.
1. “If my TFSA earns dividends or capital gains, do those amounts count as new contributions?”
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.
2. “I thought the limit was $7,000 this year. How are people contributing $20,000 or $30,000 (or more) in one year?”
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 withdrawals made last year return to you on January 1. Someone who was 18 or older in 2009 and has never contributed now has about $102,000 of cumulative room (based on Canada Revenue Agency limits from 2009 to 2025).
So, large lump sums are perfectly legitimate if you’ve banked the space. Always verify your personal limit by checking your CRA My Account and your own records before making the transfer. (The CRA’s records are not always up to date.)
