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.