These yearly amounts are reflected in your accumulated TFSA contribution room, which grows each year from the age of 18. For example, if you were 18 or older in 2009, and have not yet contributed to a TFSA, you will have $95,000 of contribution room available in 2024. A person who turned 18 in 2017 would have $48,500 of available space.
Keep in mind that the money you contribute must come from after-tax savings; you can’t transfer money directly from aRegistered Retirement Savings Plan(RRSP) or your pre-tax income.
How to find your TFSA contribution room
The Canada Revenue Agency (CRA) no longer adds TFSA contribution room to your Notice of Assessment. However, you can obtain this information by:
Penalties for over contributing
If you make a TFSA contribution that exceeds your allocated room, you’ll face a penalty tax of 1% per month on the excess funds. For example, if you exceeded the maximum contribution by $4,000, you would owe a $480 penalty ($40 per month x 12 months) after one year.
TFSA withdrawal rules
Tax-free withdrawals can be made at any time and for any purpose (pending the terms of any specific contracts, if your money is invested). There are no limits on how much you can withdraw from your TFSA at any one time. Withdrawals do not count as income, which means they have no impact on benefits like the GST Credit, Employment Insurance and Old Age Security.
As mentioned earlier, withdrawals from your account can be replaced, but you will not recover that contribution room until the following year. For example, if you were to withdraw $1,000 from your maxed-out TFSA today, you wouldn’t be allowed to recontribute that $1,000 until January 1 of the next calendar year – at which point you could add $1,000 to your account, plus the annual TFSA limit.
How to open a TFSA
Most financial-services companies – like banks, credit unions and insurers – offer TFSA accounts. To open an account, you simply need to provide your date of birth and SIN number. You can open as many TFSA accounts as you like, but TFSA rules stipulate that your total contributions across all accounts cannot exceed your TFSA contribution room.
Now that you have a deeper understanding, think a TFSA is the right way forward for you?
*In the province of Quebec, the authorized representatives are Financial Security Advisors who have been duly certified by the Autorité des marchés financiers.The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete and it should not be considered personal taxation advice. We are not tax advisors and we recommend that clients seek independent advice from a professional tax advisor on tax related matters. Mutual funds are offered through Co-operators Financial Investment Services Inc. to Canadian residents except those in Quebec and the territories. Segregated funds and annuities are administered by Co-operators Life Insurance Company. Co-operators Life Insurance Company and Co-operators Financial Investment Services Inc. are committed to protecting the privacy, confidentiality, accuracy and security of the personal information that we collect, use, retain and disclose in the course of conducting our business. Visit www.cooperators.ca/en/Privacyfor more information. Co-operators® is a registered trademark of The Co-operators Group Limited.
FAQs
Holding cash in a TFSA
But TFSAs have little in common with everyday chequing and savings accounts. That means one thing: they're no place for cash. If you're only using your TFSA to hold cash, you could be missing out on tax savings that come from investments that grow in value over time tax-free.
What are the disadvantages of TFSA? ›
No tax deductions: The biggest drawback of a TFSA, is that your contributions are made with after-tax dollars and are not tax deductible, unlike the FHSA and RRSP. Contribution limits: Though there is no lifetime maximum contribution limit, there is an annual contribution limit, stipulated by the Government of Canada.
What's the catch with a tax-free savings account? ›
You won't get a tax deduction for making a contribution like you would with an RRSP, but you also won't pay taxes when you withdraw from a TFSA. Plus, you can withdraw any time without penalty.
Why am I losing money in my TFSA? ›
Yes, you can lose money on a TFSA, but it is easy to avoid losing your money. Typically, people who lose their money on a Tax-Free Savings Account are people who are using it for more volatile investments or people who are over-contributing.
Are TFSA a smash hit? ›
TFSAs are a smash hit with Canadians, but some people are wrongly putting money in RRSPs. Almost half of all households have a TFSA and 36 per cent have both TFSAs and RRSPs. A recent study by the Retirement and Savings Institute at business school HEC Montr al took a look at whether people are making the right choice.
Is it worth putting money in a TFSA? ›
When is a TFSA worth it? TFSA is a good place for any savings goals other than retirement. If you're saving for a new car or down payment for a house, it's a great tool to use. For some people, it even works for retirement planning.
How to grow money in TFSA? ›
A key strategy is to contribute early, so your investments have more time to grow. Make sure you're consistently contributing to your TFSA by enabling automated deposits into your account. This will keep your TFSA growing in a tax-free environment. Remember to ensure that you stay within your contribution room.
Can you ever lose money in a TFSA? ›
Yes. The assets in your TFSA are like any other investment, and they can lose value over time. You can actually lose contribution room too.
What happens if you make millions in your TFSA? ›
If you run up a multi-million-dollar TFSA balance by trading options frequently, the CRA may deem your trading activities to be a business and tax you accordingly. In this scenario, you'll pay even more taxes than you would in a normal account, because income taxes are higher than capital gains and dividend taxes.
What is the lifetime limit for TFSA? ›
It also means that starting on January 1, 2024, eligible Canadians will now have a cumulative lifetime TFSA contribution limit of $95,000 (see “What is the lifetime contribution limit for TFSA?” below for examples and charts).
The Short Answer: Yes. Share: The IRS probably already knows about many of your financial accounts, and the IRS can get information on how much is there. But, in reality, the IRS rarely digs deeper into your bank and financial accounts unless you're being audited or the IRS is collecting back taxes from you.
What is the average TFSA balance? ›
For the lowest income group—people earning less than CAD 5,000—the average TFSA balance is about CAD 17,000. For people earning between CAD 15,000 and CAD 20,000, the average TFSA balance is about CAD 21,000. TFSA balances rise to about CAD 60,000 on average for people earning more than CAD 250,000.
Can I put 50k in my TFSA? ›
Your TFSA lifetime contribution limit is $75,500. Your ongoing contribution amount. There is new contribution room every year. For 2024, you can contribute up to $7000 plus any unused contribution room from previous years.
Can you make too much money in a TFSA? ›
At any time in the year, if you contribute more than your available TFSA contribution room you will have to pay a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount stays in your account. For more information, see Tax payable on excess TFSA amount.
Is my money safe in TFSA? ›
Within the insured category of TFSA, the above GIC and term deposit are eligible deposit products and are therefore combined for coverage of up to $100,000 of CDIC protection. So $100,000 of the eligible $110,000 within the TFSA category are protected.
