The Canada Revenue Agency issued a cautionary press release earlier this year about the importance of sticking within your tax-free savings account contribution limit. Titled Watch your limit – stay within it!, the CRA reminded Canadians that it’s possible to overcontribute to a TFSA in a number of ways.
One example of an inadvertent overcontribution, cited by the CRA, can occur if your TFSA is set up for pre-authorized contributions and you make additional contributions without verifying the amount of room you have available. Another is if you have multiple TFSAs with different financial institutions and you’re not carefully tracking all the contributions you are making.
But a third route to a potential TFSA overcontribution is if you misread or misinterpret your TFSA limit as shown on the CRA’s My Account self-service portal. That’s exactly what happened in a recent case. But first, let’s recap TFSA contribution basics and the consequences of a non-deliberate overcontribution.
Your TFSA limit is cumulative and begins when you’re 18 years old, assuming you were a resident of Canada in that year. Your TFSA contribution room is made up of three things: the annual TFSA dollar limit, plus any unused contribution room from previous years, plus any withdrawals you made during previous years (excluding direct transfers to another TFSA).
The annual TFSA dollar limit for 2024 is $7,000, and your cumulative limit can be as high as $95,000 in 2024, assuming you were at least 18 years old and a resident of Canada continuously since 2009, and have never contributed.
If you accidentally overcontribute, the CRA charges a penalty tax of one per cent for every month that any excess contributions stay in your account. Withdrawing them as
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