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With a tax-free savings account (TFSA), you can make withdrawals whenever you want, for any reason, without paying tax on the amount contributed as well as any income earned in the account. The money you withdraw can be re-contributed in the following year, in addition to the next year’s annual contribution maximum. Generally, your TFSA contribution room is made up of: the TFSA dollar limit for the year, any unused TFSA contribution room from the previous year, and any withdrawals made from the TFSA in the previous year.

If you re-contribute the money in the same year without having available contribution room to do so, you may be charged an over-contribution penalty of 1% per month on the excess amount until you remove it.

Learn more about how TFSAs work.