The TFSA contribution room accumulates if it is not
used, and can be used at any time in the future. The unused
contribution room at the end of a
calendar year is the positive or negative amount determined by the formula
A + B + C - D where
A is the unused
contribution room at the end of the previous calendar year
B is the total of
distributions (withdrawals) made in the preceding calendar year
C is the TFSA dollar limit
for the calendar year, if at any time in the
calendar year the individual is 18 years of age or older and resident
in Canada
D is the total of
contributions made to a TFSA by the individual in the calendar year
Certain distributions and contributions are
excluded from the above formula:
transfers made directly between TFSAs held by the
same person
transfers made as a result of a marital
breakdown, under certain conditions
withdrawals which are made to reduce or eliminate
an excess contribution
exempt contributions made by a surviving
spouse/common-law partner of a deceased TFSA
holder
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will be a tax payable even if the excess amount is withdrawn in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.
Keep Accurate Records of Your TFSA
Deposits
You can use My Account on the CRA website to see the
amount of your available TFSA contribution room. However, the
information in My Account will not include any contributions that you have
made in the current year. In fact, information for the prior year is
not updated until financial institutions have filed their information
slips with CRA in the following year, perhaps as late as April. For
this reason, it is very important to keep accurate records yourself.
TFSA Unused Contribution Room Example
Mary, age 35, started to contribute to a TFSA in 2022. By 2021 she had
accumulated $75,500 of contribution room. She has made the contributions and withdrawals shown in the
following table.
Year
TFSA
Withdrawals
(B)
TFSA
Dollar
Limit
(C)
TFSA
Deposits
(D)
TFSA
Contribution
Room
Dec 31
(A)
A+B+C-D
2021
$75,500
2022
2,000
6,000
5,000
78,500
2023
1,000
6,500
6,000
80,000
2024
3,000
7,000
7,000
83,000
The TFSA dollar limit for both 2025 and 2026 is $7,000.
Let's say that
Mary's investments in
her TFSA did well, resulting in a market value at the end of 2025 of $150,000.
Assume Mary withdraws the entire balance before the end of 2025,
and did not make any deposits in 2025.
This would increase her unused
contribution room in 2026 by $150,000.
Thus, with the TFSA limit of $7,000 in 2026, Mary's new unused contribution room on January 1,
2026 would be $83,000
+ $7,000 + $150,000 = $240,000.
Tax Tip: A
TFSA withdrawal will increase your contribution room, but not
until the following year.