The “tax-free forever” myth
Gains inside a TFSA are normally tax-free. But the shelter assumes you’re investing. If your activity amounts to carrying on a business, the CRA can tax the TFSA’s income as business income — and there’s no annual limit on how much they can assess. Several cases have gone the CRA’s way.
What draws scrutiny
- Very high trade frequency and short holds.
- Trading as a main activity, especially with professional knowledge.
- Options and speculative strategies.
- Rapid, outsized growth that flags the account for review.
No safe number. There’s no official trade count that’s “too many.” It’s the overall picture — frequency plus intent plus sophistication — that matters.
Keeping a TFSA a TFSA
Use registered accounts for buy-and-hold and longer-term positions. If you want to trade actively, do it in a non-registered account where the capital-vs-business question at least doesn’t threaten a tax shelter, and where losses can be used. Keep records that show an investing, not trading-business, intent.