- Canadian Tax Resource Blog - http://blog.taxresource.ca -

Understanding TFSA Contribution Room

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:

In the comments below there is an example of how the TFSA contribution room works [1].

Avoid Over Contributions

There is a penalty tax of 1% per month on over contributions [2] (also called the excess TFSA amount). The penalty tax is based on the highest value in the TFSA during the month.