Published January 8, 2024 • 3 Min Read
The Tax-Free Savings Account (TFSA) contribution limit has increased to $7,000 in 2024 from $6,500 in 2023. Every year, the Canada Revenue Agency (CRA) declares the annual TFSA contribution limit, which is indexed to inflation and then rounded to the nearest $500. What else should you know? Read on.
How do I use the limit to calculate my TFSA contribution room?
To calculate the total room in your TFSA available for contributions, you can add this year’s contribution limit to any unused contribution room from previous years, plus any withdrawal amounts from prior years.
Note: your contribution room starts accumulating from the time you turn 18, or in 2009 (when the TFSA was introduced), whichever is later. So, if you open a new TFSA in 2024 and have never contributed to a TFSA elsewhere, you would have total available contribution room of $95,000.You can find your TFSA contribution room by logging into My Account on the CRA website, although it doesn’t reflect any contributions or withdrawals of the current year. It’s important to double check your contribution room each year as there can be penalties through CRA for over-contributing.
Why is the TFSA limit important?
If you make contributions that exceed your room, you can be taxed 1 per cent per month on that amount. It’s also important to know what counts as a contribution. For example, transferring money between TFSAs in different institutions when done correctly will not affect your contribution room. However, if you withdraw the funds and then contribute them to another TFSA, it qualifies as a new contribution and could result in an over-contribution penalty.
What is the TFSA Contribution Deadline?
You can contribute to your TFSA at any time of year since any unused contribution room carries forward to the next year. Unlike a Registered Retirement Savings Plan (RRSP), there is no tax deduction with a TFSA contribution, so your deposits don’t need to coincide with tax time. However, for the purposes of managing your contributions and withdrawals, and knowing your TFSA limit, Dec. 31 and Jan. 1 are significant dates. Your contribution room is based on the calendar year ending Dec. 31, and your new TFSA limit for the year comes into effect on Jan. 1.
Your TFSA can be a powerful and tax-efficient tool when investing for short-term and long-term goals. Find out more about TFSAs here.
Mutual funds are sold by Royal Mutual Funds Inc. (RMFI). Guaranteed investment certificates and RBC Investment Savings Accounts are offered through Royal Bank of Canada and may be held in RMFI investment accounts where RMFI holds the asset in its name, as nominee. RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.
Investment advice is provided by Royal Mutual Funds Inc. (RMFI). RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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