Understanding TFSA Contribution Room

by Tax Guy - Burlington Accountant on December 30, 2010 Print This Post Print This Post

Reader Question If I do not open a TFSA in 2009 will the $5,000.00 contribution room carry forward, enabling me to contribute up to $10,000.00 in 2010?

If you do not use your TFSA contribution room, it will definitely carry forward. You are given $5,000 per year of contribution room. As long as you are a resident of Canada and over age 18, you will be able to carry forward and add your pays unused contribution room to new TFSA contribution room.

Who Can Contribute To A TFSA?

Anyone who is both a resident of Canada and is over the age of 18 can contribute to a TFSA.

If you do not contribute to a TFSA or don’t use all of your contribution room, the unused amount will carry forward indefinitely. There is no need to open a TFSA account to generate TFSA contribution room.

How To Calculate TFSA Contribution Room

The TFSA contribution room is calculated differently than RRSP contribution room and is more straight forward:

  • Unused TFSA contribution room from last year
  • Plus: TFSA withdrawals from last year
  • Plus: The new TFSA dollar limit from the current year
  • Less: Contributions to the TFSA in the current year.

In the comments below there is an example of how the TFSA contribution room works.

Avoid Over Contributions

There is a penalty tax of 1% per month on over contributions (also called the excess TFSA amount). The penalty tax is based on the highest value in the TFSA during the month.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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Marc January 30, 2011 at 11:54 pm

How is a contribution and withdrawal defined?

If I sell the stocks held in my TFSA trading account, but leave the procceds in the account, can I purchase other qualified investments with that same money in the same year? I was previously under the impression that a ‘sale’ was effectively a ‘withdrawal’ even if the proceeds of the sale were left within the registered account.

Great website!

Tax Guy January 31, 2011 at 11:06 am

The article answers all of your questions. You can buy and sell to your hearts content inside the TFSA. Only withdrawals from the TFSA and contribution to the TFSA affect the contribution room.

No a sale is not a withdrawal.

Jordan February 1, 2011 at 9:03 am

Hi Tax Guy,

If I am a Canadian citizen but traveling abroad for a couple years with almost no time in Canada can I still use the TFSA in the years that I am away. If I technically didn’t live in the country for the entire year does that affect my TFSA contributions or tax freedom?


Tax Guy February 1, 2011 at 1:41 pm

It would depend on whether you are a resident of Canada for tax purposes. Whether you are a resident or not is a question of fact. Take a look at some of the articles on residency.

Only a resident of Canada can contribute to a TFSA.

Terry February 6, 2011 at 12:09 pm

pls clarify the residency requirement.. I am Canadian citizen and was in Canada in 2009 for 5 months and came back in September 2010 (intended vacation was for 3 months only but did not happen- had surgery , accident, etc.). I have not opened TFSA as of yet.. How much is my allowed contribution limit for 2011? Thanks

Tax Guy February 7, 2011 at 8:01 am


Whether you are a resident of Canada for any given tax year is a question of fact and the topic of residency is too large to address in a single response. I would suggest you read through the residency determination http://www.cra-arc.gc.ca/E/pub/tp/it221r3-consolid/README.html page at the CRA.

See also http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/lgbl-eng.html.

You should contact the CRA or refer to your Notice of Assessment or Reassessment.

chris February 10, 2011 at 7:59 pm

Hi Tax Guy,

I bought $5000 worth of shares in Nov 2009 and the book purchase price is $5100 including fees. I have never paid taxes on this. So does that mean that the $100 is taxed at 1% every month of that year and subsequent years. So to date that is 1% *15 months * highest amount per month of original $100 now that we are in February 2011?
I plan to sell the shares and buy another set of shares from another public company. Do I set aside a portion to pay taxes in 2011? All this confusion for me now over a mere $100.

Tax Guy February 11, 2011 at 4:27 pm

Did you contribute $5,000 to a TFSA and then buy the stocks? If so, then you would not pay any tax on the gain and there is no penalty tax.

kevin March 6, 2011 at 6:40 pm

I moved my tfsa from an investing firm to self directed account at our bank in june of 2010 .I paid 536$ in withdrawl fees out of my 10,011$ balance in the account,can i recontribute this expense amount in 2011?

Tax Guy March 7, 2011 at 6:09 pm

I suggest contacting the CRA to find out if it was included as part of your withdrawal. If you simply transferred from one financial institution to another in the fee probably is not deductible.

Kaeota March 15, 2011 at 8:42 pm

What is TFSA? What are we suppose to do with it? How do we withdraw the amount?

Tax Guy March 16, 2011 at 4:51 am
George March 19, 2011 at 2:31 am

Hi Tax Guy,
I have a question, I just opened a TFSA for $15,000 (3yr allowance), i have not invested it in anything yet, i am thinking about setting this investment as a mortgage secured by a house, which I could offer to a third party arms length borrower, the monthly payments which are being paid back may include a combination of principal and interest, or I can set it up as interest only. Would all payments i receive stay in the account,and if payments are late and their are additional penalties, if those fees remain in the TFSA account are they also considered tax free? Thank you

Tax Guy March 19, 2011 at 10:13 am
George March 20, 2011 at 11:14 pm

Why is it illegal, it says you can hold mortgages in real property, if i offer $15,000 as a second or third mortgage to someone, at an interest rate compound semi annually not in advance, for 5 yrs term at prime + 5% for example what makes this illegal. Please see, http://www.cwt.ca/iris/mortgage_broker/IMBA_docs/ArmsLengthInfoPackageMarch2010IMBA.pdf

Tax Guy March 21, 2011 at 3:07 am

Mortgage extended under the NHA are permitted. But anyone reading your question may have assumed they could have just lend money to anyone.

This thread is about TFSA contributions. Please ensure your questions are on topic.

Hashim January 20, 2012 at 1:29 pm

Hi there, thanks for all the info. Question: Since investing in a particular stock last year with my TFSA trading account, I’ve earned about 25% in returns. If I sell the stock in my TFSA account today, can I reinvest the profits within this account in addition to my yearly $5000 contribution for this year, or is the profit going to be considered part of my yearly contribution? Thanks!

Bridget March 31, 2012 at 9:00 pm

I became a permanent resident in Canada in Feb 2012 and would like to open a Tfsa now. What will be the maximum contribution limit I can use? $ 5000 or $ 20000. (considering accumulation from 2009?)

Tax Guy March 31, 2012 at 9:34 pm

It would be $5,000.

vingo May 31, 2012 at 2:35 am

here is my question: one of my friend is a visa student over 18 years old,can he open a tfsa ? and if it’s possible, what heppen to the account if he decides to leave canada 3 years later?

Tax Guy May 31, 2012 at 7:48 am

Hi Vingo,
Take a look at the TFSA Questions and Answers article.

Laurie Petersen July 25, 2012 at 12:42 pm

If my fiance is over 18 and is a Canadian Citizen all his life, can he open a TFSA acct. in 2012 and put in the full amount of $20,000.00 ? He is selling his house and we want to invest the profit amount in a TFSA and RRSP’s for him.

Anthony October 9, 2012 at 4:39 pm

Ok after trying to figure out what this TFSA is no one has said what it is? I’m very new to this and want to know, my TFSA is $20,000 right now as of oct 8th 2012 , I don’t know what this account is and I don’t know what to do with it?? Anyone able to explain this tome step by step??

Tax Guy - Burlington Accountant October 10, 2012 at 9:07 am

The TFSA is a tax-free savings account. You are allowed to deposit up to $5,000 for each year after age 18. The investment income grows tax-free and the withdrawals are tax-free.

See: http://blog.taxresource.ca/category/tfsa/

Daniel October 16, 2012 at 6:34 pm

How do i find out how much contribution room I have left.

Tax Guy - Burlington Accountant October 17, 2012 at 4:19 pm

You can check your last notice of assessment and then calculate the available room from there.

Olive Mahoro November 5, 2012 at 8:52 pm

I want to open TFSA and I want to know how much I’m alloow to.
I have 0$ contribution so far. If want to open this account by end of 2012, Can I put 20000$ or 5000$. If the answer is 5000$ when will I be able to contribution for up to the maximum I’m allowed to as TFSA contribution room accumulates every year.

Chris January 11, 2013 at 1:32 pm

I have 2 TFSA’s. One is savings and the other is stocks.

Savings has 5k
Stocks has 5k
Remaining available deposit (as of 2012) is 10k.

If my stocks double to 10k and I withdraw 5k, does that mean my remaining deposit jumps to 20.5k (15k previous & 5.5k for 2013) for the following year? Or would it just be 15.5k?

Tax Guy - Burlington Accountant January 11, 2013 at 2:01 pm

Hi Chris,
if you withdraw $5,000, then $5,000 is added to your contribution room next year in addition to the annual limit.

Sammy January 21, 2013 at 11:00 pm


I made a deposit to my TFSA 2009, the investment turned to $10,000 in 2 months. I withdrew $10,000 by the end of 2009. Please advise what is the maximum amount I can contribute in 2010 ($5,000 or $15,000). Thanks! WhyWhy

Gunman86 March 11, 2013 at 10:17 pm

I came canada as permanent resident In October 2010. So what’s my tfsa contribution limit upto today march 2013. Thanks..

ian sheridan March 29, 2013 at 12:08 am

I am not clear on this…. If I have $10,000 in my tfsa today and decide to take out $5000 this year (2013) to purchase something, will I get that $5000 room back in January 2014 along with the annual room increase of $5,500 ?
Thanks for your reply asap.

Lou bisonet July 21, 2013 at 11:11 pm

I have over contributed in my TFSA by $3.72 thru a stock purchase. Will revenue Canada bother to penalize me the 1% or will they ignore such a small amount.
Thank you.

Tax Guy - Burlington Accountant July 31, 2013 at 12:03 pm

Difficult to say. I haven’t come across this before.

Joe October 12, 2013 at 12:51 pm

I opened my first TFSA in January 2012. I deposited 20,000$. I deposited 5,500$ in January 2013. Yesterday, 22 months after opening my first TFSA, I received a letter from CRA saying that I over contributed in 2012 by 775.58$ and that I owe about 93$ for 2012. They write that my contribution limit for 2012 was 19224.42$.
I never had a TFSA before January 2012, so this is really confusing me. Is it possible that they’ve confused me with someone else? Could a different bank have sent my social insurance number to CRA by mistake for someone else’s 775$ contribution prior to 2012? Has anyone heard of this happening? I’ll be phoning CRA as soon as the long weekend is over … but it’s so frustrating to have to wait to find out what’s gone wrong. And why on earth do they wait 22 months to notify me?

Tax Guy - Burlington Accountant October 22, 2013 at 5:31 pm

Hi Joe,
Not sure from the information provided but perhaps you have another TFSA somewhere?

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