Withdrawals from a TFSA account are tax-free, and do not count towards your income for the year. However any funds withdrawn from a TFSA can only be ‘re-contributed’ that same year if you have the available contribution room.
This is generally not a concern unless you plan to re-contribute the withdrawn amount, and you are close to, or at your TFSA limit.
On January 1st in the following calendar year, this will ‘reset’ and you’re free to re-contribute the withdrawn amount if you’d like.
In addition, every year on January 1st. you gain additional TFSA contribution room if you’re a Canadian resident over the age of 18. For 2023, this amount is $6,500 for example.
You can also check your TFSA contribution limit/room on the CRA’s myAccount page at any time.
For example: If you withdraw $5,000, you will regain the $5,000 in room next year on January 1, plus add any additional contribution from for the year.
