Nov 14, 2016
Personal Investor: What you should know before making a TFSA contribution
By Dale Jackson
Canadians love their tax free savings accounts. And why not? The TFSA allows you to hold just about any kind of investment and you are never taxed on the gains.
Since the TFSA was first introduced in 2008, more than 12 million accounts have been opened totaling more than $120 billion in assets. Some people contribute what they can, some contribute the maximum and some have several accounts.
As the TFSA has matured, the rules surrounding contributions have become confusing. Annual allowable contributions can be carried forward through the years, but if you over-contribute they could be costly.
One timely example applies to account holders who contribute the maximum amount and have made a withdrawal in the 2016 calendar year. It’s important to know that you do not regain that contribution space until the 2017 calendar year. Any amount re-contributed before 2017 could be subject to penalty.
Here’s how contribution space has been calculated through the years:
TFSA Contribution Room
| Years | TFSA Annual Limit | Cumulative Total |
|---|---|---|
| 2009-2012 | $5,000 | $20,000 |
| 2013-2014 | $5,500 | $31,000 |
| 2015 | $10,000 | $41,000 |
| 2016 | $5,500 | $46,500 |
If you would like to know your contribution status, don’t rely on your financial institution to keep up with your contributions and withdrawals. Instead, go right to Canada Revenue Agency, which will display your current available space in your personal, secure online account. Be sure to factor in any contributions or withdrawals made during 2016.
If the CRA says you’re cool, you’re cool.
