The Tax-Free Savings Account (TFSA) is designed to help you save and invest money without paying tax on the gains. For this reason, the government limits how much you can contribute to your TFSA each year. As long as you're eligible to have a TFSA, you'll gain a certain amount of contribution room every year. Any contribution room you don't use gets carried forward until you use it.
Any funds you add to your TFSA will count towards your total available contribution room. When you withdraw funds from a TFSA, the amount you withdraw only gets added back to your contribution room on January 1st the following year.
You do not need to report contributions or withdrawals from your TFSA on your tax return. Instead, your institution sends this information to the CRA for their records.
Find your available contribution room
One of the most reliable ways to check your available contribution room is to log in or register for an online account with the Canadian Revenue Agency. They track all of your TFSA contributions and update it at the beginning of every calendar year (even if you have TFSAs at different institutions).
What to do if you over-contribute to your TFSA
If you exceed your TFSA contribution limit, you may receive a tax penalty from the Canadian Revenue Agency (CRA). You can read more about this below —
Did you actually over-contribute to your TFSA?
Only deposits are considered to be contributions to your TFSA, so if you've accrued enough interest or earnings in your TFSA your account value may be over the contribution limit, but your actual contributions are not.
If you know you definitely over-contributed to your TFSA
Over contributions to TFSAs are subject to a 1% penalty tax per month (only on the over-contribution amount).
Once you know you've over-contributed, it's best to contact our support team to let us know as quickly as possible. Be sure to include how much you need to move out of your TFSA. You’ll be charged for each calendar month that the excess is in your TFSA, so even if you’ve only been over your contribution room for eight days of a month, you’ll be charged for the entire month.
When will my TFSA contributions show up on my CRA MyAccount profile?
The CRA updates contribution limits on an annual basis. Wealthsimple will send contribution amounts for the 2021 calendar year in early 2022.
The CRA takes time to process this information once they receive it, but come April, your CRA MyAccount profile should be updated to reflect 2021 contributions.