How to make the most of your TFSA contribution limit (2024)

FAQs

How to make the most of your TFSA contribution limit? ›

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.

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.

Enter a year between 1922 and 2022. How much have you contributed to your TFSA in total? Enter an amount less than $95000 the current maximum lifetime contribution limit.

Excess TFSA amount letter

If you have not removed the excess, it should be removed immediately. For information on your current year room limit, go to My Account (for your room limit as of January 1) or complete Form RC343, Worksheet - TFSA contribution room if you have contributed to your TFSA in the current year.

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.

If you're earning less than $50,000: You should fund a TFSA first because you're in the lowest tax bracket, and reducing your taxable income won't further lower your tax rate. If you're earning between $50,000-$98,000: You may want to consider funding your RRSP and TFSA equally until you max out your TFSA.

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.

Yes, you can have multiple TFSAs. However, your annual contribution limit applies to your total funds, unless you have unused contribution room.

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.

Can I put 50k in my TFSA? ›

The TFSA contribution room is what Canadians have accumulated for every year since 2009 that they have been at least 18 years of age, had a Social Insurance Number, and been a Canadian resident. While the TFSA contribution limit for 2024 is $7,000, the maximum contribution amount is $95,000.

The Tax-Free Savings Account (TFSA) contribution limit has increased to $7,000 in 2024 from $6,500 in 2023. Every year, the Canada Revenue Agency (CRA) declares the annual TFSA contribution limit, which is indexed to inflation and then rounded to the nearest $500. What else should you know? Read on.

If you've always contributed the maximum amount into your TFSA, the most you can put in is $7,000 for 2024. But if you never contributed before and turned 18 in 2009 or earlier, you may contribute up to $95,000.

The TFSA penalty works the same way as its RRSP counterpart, except there's no $2,000 buffer. The government will charge you 1% monthly on your entire overcontribution. It's important to note that unused room carries forward with TFSAs, too.

Please note that I can only provide you with general legal information here, not legal advice. There is no lawyer-and-client relationship established. No, income earned within the TFSA, such as dividends or interest, does not count towards your contribution limit.

To avoid these hefty fees, you should instead take advantage of the re-contribution rule: Withdraw the funds from your current TFSA near the end of the calendar year, and in the following year, open a new account at the financial institution of your choosing and recontribute your withdrawal to it.

Growth on your investments inside a TFSA does not affect your contribution room, and you can take money out when you want, for any reason, without paying any tax. If you take money out, you can re-contribute it the following year, in addition to the annual maximum.