Knowing how much tax-free savings account (TFSA) contribution room you have available will help you take maximum advantage of tax-sheltered growth potential, and also help you avoid over-contribution penalties.
How much contribution room do you have? For a given year, your TFSA contribution room is the total of:
- your annual TFSA contribution limit
- any unused contribution room from the previous year
- any withdrawals made from your TFSA in the previous year
If you have multiple TFSAs, your combined contributions to all of them cannot exceed your available contribution room for the current year.
How to check your TFSA contribution room
The Canada Revenue Agency (CRA) tracks your contribution room. You can see your TFSA balance as of January 1 of the current year by logging in to your online “My Account” on the CRA website. Or you can get your balance by phoning CRA’s Tax Information Phone Service: 1-800-267-6999. Check after mid-February, to allow time for your financial institution to report all your TFSA transactions from the previous year. Ideally, keep track of those transactions yourself to ensure you don’t over-contribute.
Contribution room carry-forward
If you can’t contribute the maximum allowable in a given year, you can catch up in the future. Unused contribution amounts can be carried forward indefinitely and used in subsequent years.
Withdrawals can be re-contributed
TFSAs are flexible. You can withdraw funds any time and the amounts withdrawn in a given year are added back to your contribution room for the next year. For example, you can withdraw an amount in December, then re-contribute that amount in January.
There is a penalty if you accidentally contribute more than your allowable limit. In that case, a tax equal to 1% of the highest excess TFSA amount in the month will be applied for each month that you are in an excess contribution position.
For more information about contribution limits, visit the TFSA section of the Canada Revenue Agency website.
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