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Gregory, Harriman & Associates LLP Blog

Individuals 18 years of age and older may deposit up to $6,000 into a Tax-Free Savings Account (TFSA) in 2020. You do not need to have earned income to contribute to a TFSA. Consider a catch-up contribution if you have not contributed the maximum amounts for prior years.

A person may be able to contribute up to a maximum of $69,500 depending on their age. An individual’s contribution room can be found on the prior year’s notice of assessment or online on CRA’s My Account. Contributions made to a TFSA are not tax-deductible. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn. Administrative or other fees in relation to TFSA and any interest or money borrowed to contribute to a TFSA are not deductible.

Penalties for Overcontribution

All TFSA contributions made during the year, including the replacement or re-contribution of withdrawals made from a TFSA, will count against your contribution room. At any time in the year, if you contribute more than your allowable TFSA contribution room, you will be considered to be over-contributing to your TFSA and you will be subject to a tax equal to 1% of the excess amount for each month that the excess amount remains in your account.

 

Contributions

Withdrawals

January 2020 contribution

$6,000

 

June 2020 withdrawal

 

($5,000)

August 2020 contribution

$5,000

 

Total 2020 contributions

$11,000

 

Contribution limit

($6,000)

 

Overcontribution

$5,000

 

To avoid overcontributing, you will need to wait until January 2021 to make another deposit. The withdrawal would increase the annuitant’s TFSA contribution room at the start of 2021.

Your contribution room is per person, not per account. Be careful when contributing to two different TFSA accounts.

For additional information or assistance with any of the above, contact Gregory Harriman & Associates LLP by email at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 1-403-934-3176.