The Buzz

Watch your limit when contributing to your Tax-Free Savings Account (TFSA)!

Are you saving for a car or a dream vacation? A TFSA is a great way to save tax-free. The TFSA is a way for individuals who are 18 and older and have a valid social insurance number (SIN) to save money and withdraw it tax-free throughout their lifetime.

Whether you already have a TFSA or are thinking about opening one soon, it is important to remember that overcontributing to your TFSA can result in a tax of 1% for every month that the excess contributions stay in your account(s).

Understanding your contribution room

There is a limit on how much you can put in your TFSA and that limit is made up of three things:

1. the annual TFSA dollar limit (the TFSA dollar limit for 2024 is $7,000)
2. any unused contribution room from previous years
3. any withdrawals you made during the previous year (excluding direct transfers from another TFSA)

Here’s how to stay within your limit:

Step 1: Check My Account for the TFSA limit for the year and your unused contribution room from the previous year.

Step 2: Check your TFSA transactions with your financial institution to see how much you have already contributed this year. Remember that if you have more than one TFSA, your total contributions to all TFSAs will need to stay within your limit.

For more information, check out TFSA contributions.

How will the CRA notify you about overcontributing?

If you overcontribute to your TFSA you will be notified through My Account or by mail. Make sure you are registered for My Account and are signed up for electronic mail notifications.

Mistakes happen! If you do overcontribute, withdraw excess amounts as soon as possible. You may be assessed on the overcontribution resulting in paying tax on the excess amount.

What can lead to overcontributing?

There are various reasons that can cause people to overcontribute to their TFSA. Want to avoid these mistakes? Check out our new webpage that walks you through the common ways people tend to overcontribute and how you can avoid them.

The page highlights common scenarios such as:

• managing more than one TFSA
• transferring money in and out of your TFSA
• misunderstanding your contribution room in My Account

Additional resources

Looking to learn about more ways to save? In our latest podcast episode, TFSA vs. RRSP, what's the difference?, we dive into the differences between the two registered plans and answer the most frequently asked questions.