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RRSPs RRIFs and TFSAs -> Tax-free savings accounts (TFSAs) -> Contribution rules
Tax-free savings account (TFSA) contribution rules
The easiest way to establish a record of your TFSA contribution room is to file a tax return annually, even if you have no taxable income. Your TFSA contribution room will then be reported on your notice of assessment. However, Canada Revenue Agency says that Individuals who have not filed returns for prior years (because, for example, there was no tax payable) would be permitted to establish their entitlement to contribution room by filing a return for those years or by other means acceptable to the CRA. The tax payable for excess contributions to a tax-free savings account is 1% per month, for any month in which there is an excess amount at any time in the month. This means there will be a tax payable even if the excess amount is withdrawn in the same month in which it is contributed. There is no deadline for contributions to a TFSA, as the unused contribution room is carried forward into the next year. However, a withdrawal in any year does not increase the TFSA room until the following calendar year. Thus, if you are thinking of making a withdrawal close to year end, make sure it is done by December 31st, in order to have the withdrawal amount added back to the TFSA room sooner. Tax tip: If you have a loss on your investment, don't transfer it to your TFSA. |
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