Day Trading in a TFSA: Still Under the Tax-Free Shield?

Are you getting into the day trading realm? Day trading has become a popular side hustle for many Canadians, with the average yearly earnings ranking at $67,995, which is higher than the individual average income of $54,360.

Before you head full steam into day trading, you need to be aware of the tax implications, one of which involves day trading in a TFSA. The CRA has specific guidelines on when the tax-free shield is broken, making it essential that you stay within the realms to avoid an unexpected tax bill next year.

What is Day Trading?

According to the CRA, a day trader is an individual that earns money or works in the investment industry that manages short-term investment transactions. Although buying and selling stocks and other commodities in the same day is generally considered day trading, the CRA doesn’t view individuals as day traders until they utilize the money they earn as their sole source of income or earn more than their regular job.

How Does the CRA Regulate Day Trading in a TFSA?

When day trading results in a gain, which means you sold the item for more than you paid, taxpayers are required to report taxable income. Some individuals have tried to leverage the tax shield of TFSAs to avoid paying taxes on the profits. However, this is against the rules according to the CRA.

The CRA recently ruled that a day trader pays taxes on nearly $600,000 worth of investment gains within a TFSA. The rationale behind this ruling was that the taxpayer, Fareed Ahamed, was an investment advisor that was running a business within his TFSA. Even though the investments were inside the TFSA, he must still pay taxes on the profits.

Although day trading is allowed within a TFSA, it isn’t recommended. You will need to keep track of the profits realized from day trading and pay the corresponding taxes. This can make it tricky to pay the correct amount of taxes.

In addition, TFSAs are made for long-term investments, not short-term positions. Trading under another account, such as at a brokerage, can make it simpler to trade more frequently and keep track of your positions.

What Investments Qualify for the Tax-Free Shield?

To avoid paying taxes in your TFSA, make sure you only hold qualifying investments in the account. These can include cash, mutual funds, bonds, guaranteed investment certificates, and ETFs.

Keep in mind that you can move profits from day trading into your TFSA to take advantage of tax-free growth. However, you need to make sure you pay corresponding taxes on the profit before the funds are moved to the account.


Day traders that are successful have the opportunity to enjoy significant gains and profitability. However, you want to be sure that you are staying within the realms of the laws surrounding TFSAs.

For more information on what breaks the tax shield, when you are considered a day trader according to the CRA, and how to minimize your tax burden, reach out to one of our team members at NRK Accounting today.



Leave a Comment

Your email address will not be published. Required fields are marked *