How much TFSA room you actually have (and what kills it)

Your TFSA contribution room isn't just this year's $7,000. It's every year since you turned 18 and became a Canadian resident, minus what you've already contributed. If you qualified for a TFSA when they launched in 2009 and never contributed a dollar, you can drop $102,000 into one today.

Most people know they get $7,000 of new room each year. What they don't track is how withdrawals work, how over-contributions get penalized, and why the math gets messier if you opened your first TFSA mid-career.

How TFSA room actually builds up

You earn contribution room starting the year you turn 18, as long as you're a Canadian resident with a Social Insurance Number. The room accumulates whether you open a TFSA or not.

If you were 18 before 2009, you've earned the full cumulative amount: $102,000 by 2025. If you turned 18 in 2015, you started earning room that year with the one-time $10,000 limit, then $5,500 the next year, and so on.

The annual limits get indexed to inflation and rounded to the nearest $500. The government bumped it to $10,000 in 2015 as a campaign promise, then back down to $5,500 in 2016. Since 2019, it's been climbing: $6,000, then $6,500, now $7,000 for both 2024 and 2025.

Your total room is cumulative across all your TFSAs. If you have accounts at three different banks, the $102,000 limit applies to all of them combined — not $102,000 per account.

The withdrawal rule that catches people

When you withdraw from a TFSA, you get that room back — but not until January 1st of the following year.

Say you contributed $50,000 over the years and your current balance is $65,000 thanks to growth. You withdraw $20,000 in March 2025. Your remaining room for 2025 stays the same — you can't re-contribute that $20,000 until 2026. If you try, the CRA treats it as an over-contribution.

This is where people get trapped. They pull money out for a car purchase or emergency, then think they can put it back a few months later when their finances recover. The CRA disagrees, and you'll pay 1% per month on the excess until you remove it.

What over-contributing actually costs

The penalty is 1% per month on the excess amount. Not 1% annually — monthly. Over-contribute $5,000 and you're paying $50 every month until you withdraw it.

The CRA will send you a letter if they catch it, but the penalty starts accruing immediately. They don't wait for you to receive the notice. Once you withdraw the excess, you need to file a TFSA Return form to report it, but there's no need to call them — your bank reports the withdrawal automatically.

Some people over-contribute on purpose, thinking the penalty is worth it for a few months of tax-free growth. The CRA can assess additional taxes and penalties if they determine it was intentional.

What actually counts as contribution room

Your contribution room calculation:

• Total cumulative room since you turned 18 (up to $102,000 if you qualified in 2009)
• Minus all contributions you've made
• Plus all withdrawals you made in previous years
• Plus this year's new room ($7,000 for 2025)

Growth inside the account doesn't affect your room. If you contributed $30,000 and it grew to $45,000, your contribution room isn't reduced by that $15,000 gain.

If you weren't a Canadian resident before 2010, your room starts accumulating from the year you became a resident. Move to Canada in 2018, and your total room by 2025 would be $45,500 — not the full $102,000.

The exact calculation matters more as you get closer to your limit. If you're nowhere near maxed out, the annual $7,000 is probably all you need to track.

If you're deciding between maxing out your TFSA or contributing to an RRSP first, run the numbers at TaxSplit.ca. At higher incomes, the RRSP tax refund usually wins. Below $50,000, TFSA room is typically more valuable.