RRSPs RRIFs and TFSAs -> Tax-free savings accounts (TFSAs) -> Withdrawals
Here is the basic information regarding withdrawals from a tax-free savings account:
Note that if your TFSA has had losses and you make a withdrawal, only the actual amount of the withdrawal increases the contribution room in the next year. See the Jamie Golumbek article in the Financial Post about a court case related to this: Judge says blame the bank, not the CRA, in latest TFSA overcontribution case.
If the maximum has been contributed to a TFSA, and then a withdrawal is made, no further amount can be contributed (without penalty) until the following year. On January 1st of the following year, the withdrawal amount from the previous year will be used to increase your regular annual contribution room.
Amendments to the Income Tax Act in Bill C-47, which became law in December 2010, included rules to ensure that any withdrawals of amounts regarding deliberate overcontributions, prohibited investments, non-qualified investments, asset transfer transactions and income related to those amounts do not constitute withdrawals for TFSA purposes, and do not create additional TFSA contribution room.
- Unless you are retired, you are usually better to withdraw money from a TFSA instead of an RRSP.
- Don't accidentally overcontribute to your TFSA - you'll pay penalties!
TFSA Investments - qualified, non-qualified, and prohibited
Back to TFSA main page.
Revised: February 18, 2021
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