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What you should know about TFSA Contribution Limits

Written by Stephen Hoenig
Reviewed by Jessica Steer
In Canada, there are plenty of different savings accounts out there meant to help you get the most out of your money.
Table of Contents

    One of these many different accounts is a TFSA account, also referred to as a Tax-Free Savings Account. That said, what exactly is a TFSA?

    TFSAs are used to save your money while providing a tax benefit. The money you invest into a TFSA is not taxed on any income earned in the account, even if you withdraw it. This is the reason many Canadians like to use these accounts for different investment income, including capital gains earned. However, there are limits to what you can invest into your TFSA, and any amounts you withdraw can affect those limits.

    How TFSAs Work

    In Canada, anyone who is at least 18 years old and has a valid social insurance number can open a TFSA. If you’re a resident of Canada, you won’t be taxed on any contributions. However, if you aren’t a resident of Canada, you’ll be taxed 1% per month on your contributions for as long as they remain in the account.

    Because TFSAs are tax-free, you don’t have to file an income tax return for your TFSA. That said if you do have to pay any taxes, that will likely show through your income tax return. However, that isn’t common. 

    How to Invest in a TFSA

    When you’re opening an account, there are a few different ways you can choose to contribute to a TFSA. You can choose to invest in it every month, you can create a self-directed TFSA where you invest different securities, or you can have an investment manager build and manage your portfolio in a TFSA for you. 

    No matter how you choose to invest in a TFSA, though, there are a few different investments that are allowed to be invested. These are many of the same investments that are allowed in an RRSP and include:

    • Cash
    • Mutual Funds
    • Bonds
    • GICs (Guaranteed Investment Certificates)
    • Securities (as long as they’re listed on a designated stock exchange)
    • Certains shares of small business corporations

    You can also invest foreign funds in a TFSA. However, the money will be converted into Canadian funds before it’s invested. The exchange rate used will be the current exchange rate for the day you choose to invest, and the amount in Canadian dollars can’t be more than your contribution limit. It’s also important to remember that while you won’t be taxed on any investment income earned in the account, you could be subjected to the foreign withholding tax depending on how that income was earned. 

    TFSA Contribution Limits

    If you are contributing to a TFSA, it’s important to know what your maximum contribution limit is, also known as the maximum amount you can deposit. This is because any amounts contributed to your TFSA that are excess contributions to your allotted contribution limit will be taxed 1% on the highest excess TFSA amount above your limit every month. This excess amount includes all contributions made throughout the year, even money you’ve contributed after withdrawing. 

    Limits for All Years

    What your total contribution room is is based on when you turned 18 years old. You’ll have earned a contribution room for every year since then since the contribution room accumulates. Let’s take a look at the different maximum TFSA dollar amount limits for previous years as well as the current year.

    When you start earning TFSA contributions, they aren’t prorated for the year you turn 18. You start earning room at the beginning of that year, so you will be able to make full TFSA contributions on your TFSA dollar limit. 

    YearMaximum Annual Contribution Room
    2009 - 2012$5,000
    2013 - 2014$5,500
    2016 - 2018$5,500
    2019 - 2022$6,000

    When looking into your personal TFSA contribution room, any interest income or investment income earned in the account isn’t included as a contribution. It doesn’t affect your contribution room for current or future years. Only the original investment does. Whenever you open your TFSA, you’ll still have earned unused contribution room for the time you’re eligible for one. 

    Carrying Over Contribution Room

    An important thing to remember when investing in your TFSA is that any unused TFSA contribution room can be carried forward to the following year and added to your lifetime contribution limit. What you withdraw from your account is also included in your annual TFSA dollar amount allowed, so looking at what you have in the account isn’t always an indication of what your contribution room is. It’s best to look it up to avoid any over-contributions and penalty tax. 

    How to Find Your TFSA Contribution Room

    If you’re looking into what your total contribution limit is, there are a few different ways to find out. You can look at your MyAccount or MYCRA accounts for an accurate limit. You can also ask your tax representative if you have one, or you can call the Tax Information Phone Service (TIPS). There’s also the Form RC343 worksheet which can help you calculate your contribution room. The CRA (Canada Revenue Agency) will also provide you with a TFSA Room Statement if you request one. 

    There’s also the Form RC343 worksheet which can help you calculate your contribution room. 

    If you’re interested in what your contributions and withdrawals have been, then you can request a TFSA Transaction Summary. If you aren’t sure why your TFSA room is smaller than you thought, this statement could explain why since your withdrawals do count towards your contribution limit. 

    TFSA Lifetime Limit

    Your current lifetime limit on your TFSA is based on the year you turned 18 since that’s when your contribution room accumulates from. If you turn 18 in 2023, then you can currently contribute to your TFSA up to $6,500 since that’s the current year's contribution limit. If you turned 18 in 2009 or earlier, then your room for total contributions is $88,000 since the contribution limits didn’t begin until 2009. 

    If you weren’t born in Canada, then how your contribution limit is calculated is a little bit different. If you became a resident before your 18th birthday, then your limit will still be calculated from when you turned 18 or 2009, whichever came first. If you became a resident after you turned 18 and after 2009, then your contribution limit will begin the year that you became a resident of Canada. 

    Withdrawing From Your TFSA

    Unlike RRSPs, you can withdraw money from your TFSA whenever you like. That said, anything you withdraw in a year won’t be added to your contribution room until the next year. This means that if you withdraw and then put the money back right away, the re-contribution amount will be considered as part of the current year's contribution room. If you aren’t careful, this could lead to overpayment penalties. 

    Unlike withdrawing from an RRSP, TFSA withdrawals aren’t considered taxable income. This means that even if you need to take some out during retirement, it won’t affect your Old Age Security or Guaranteed Income Supplement amounts. These federal-income-tested benefits are considered a part of your retirement income, so only withdrawn RRSP amounts will affect those. 

    Differences Between Resident and Non-Resident of Canada for Tax Purposes

    If you’re new to Canada and want a TFSA, it’s important to consider whether you’re a resident or non-resident for tax purposes. This is because non-residents are subject to a tax equal to 1% per month on all contributions. Even though you can get a TFSA with a valid SIN card as long as you are 18, that doesn’t mean you won't be subject to the extra tax. 

    Resident for Tax Purposes

    To be considered a resident of Canada for tax purposes, you need to establish residential ties. This includes having a home in Canada, a spouse or common-law partner in Canada and dependents in Canada. Having secondary residential ties can also help you. These include:

    • A Canadian Driver’s License
    • A Canadian Passport
    • Health Insurance in Canada
    • Canadian Bank Accounts and Credit Cards
    • Personal Property in Canada
    • Social Ties in Canada

    Even if you’ve left Canada, you could be considered a factual resident if you still have residential ties and are doing any of these things outside of Canada:

    • Vacationing
    • Working
    • Commuting
    • Attending School

    If you’ve emigrated from another country and have established residential ties and become a Canadian resident in the tax year, then you would also be considered a resident for tax purposes. Whether you’ve established residential ties or not, you could also be considered a factual resident if you’ve been in Canada for at least 183 days. 

    Non-Resident for Tax Purposes

    To be considered a non-resident of Canada for tax purposes, there are a few stipulations. If you do any of the following, then you may be considered a non-resident.

    1. Stay in Canada for less than 183 days per year.
    2. You live outside of Canada throughout the tax year.
    3. You normally live outside of Canada and aren’t considered a resident.

    That said, even if you don’t live in Canada but still have enough residential ties to consider you a factual resident, you’re still considered a resident for tax purposes. This means that you would be able to get a TFSA without paying the 1% tax as long as you stay within the allotted contribution limits. 

    Difference Between RRSPs and TFSAs

    While RRSPs and TFSAs are both accounts in which you can hold investments with contribution limits, there are some differences. The main difference is that TFSAs allow for tax-free withdrawals, while RRSPs have a withholding tax when you withdraw the amounts from your account. 

    Another difference is that you can have more than one RRSP, but you can only have one TFSA. You can give money to your spouse to contribute to their own TFSA, but you can’t have more than one TFSA.

    When deciding whether to contribute to an RRSP or a TFSA, keep in mind that RRSPs are intended as retirement income. The idea is to save your income tax-free and then take it out at retirement and pay a lesser tax amount since your marginal tax rate will be lower. A TFSA is intended to save investments tax-free but gain access to the funds whenever you need them. 


    While a TFSA is only one of the ways you can choose to invest in Canada, it’s quite popular, considering the money isn’t locked in, and you aren’t penalized for any withdrawals. However, because there are tax savings involved, there are yearly contribution limits you have to follow in order to avoid any over-contribution penalties. 

    Your annual TFSA contribution limit is based on when you turned 18 or when you became a resident of Canada. No matter when you choose to open the account, your contribution limits will increase every year based on the year you were eligible. At any point, you can choose to open this account and start contributing or investing. In order to do this, you just need to contact an advisor at your financial institution, and they will be able to guide you through the process. 

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