How Is TFSA Contribution room determined? Do ALL withdrawals increase the max? | Page 3 | Tax Free Savings Accounts | Discussion forum

Online you can withdraw from your Tangerine TFSA to your Tangerine savings account, and vice versa, instantaneously.

The annual TFSA dollar limit is a component of, and not entirely, one's TFSA contribution room.

Income Tax Act 207.01(1) defines them as follows. The dollar limit is component C of one's TFSA contribution room:

TFSA dollar limit for a calendar year means,

(a) for 2009 to 2012, $5,000;

(b) for 2013 and 2014, $5,500;

(c) for 2015, $10,000; and

(d) for each year after 2015, the amount (rounded to the nearest multiple of $500, or if that amount is equidistant from two such consecutive multiples, to the higher multiple) that is equal to $5,000 adjusted for each year after 2009 in the manner set out in section 117.1.

unused TFSA contribution room of an individual at the end of a calendar year means,

(a) if the year is before 2009, nil;

(a.1) in circumstances where the Minister has, in accordance with section 207.06, waived or cancelled all or part of the liability imposed on the individual, the amount determined by the Minister; and

(b) in any other case, the positive or negative amount determined by the formula

A + B + C - D

where

A is the individual’s unused TFSA contribution room at the end of the preceding calendar year,

B is the total of all amounts each of which was a distribution made in the preceding calendar year under a TFSA of which the individual was the holder at the time of the distribution, other than a distribution that is

1. a qualifying transfer, or
2. a specified distribution,

C is

1. the TFSA dollar limit for the calendar year, if at any time in the calendar year the individual is 18 years of age or older and resident in Canada, and
2. nil, in any other case, and

D is the total of all amounts each of which is a contribution made under a TFSA by the individual in the calendar year, other than a contribution that is

1. a qualifying transfer, or
2. an exempt contribution.

Why is this thread going into 3 pages? OP...it's very simple. If it came OUT of your TFSA, it can go back in next tax year. Source of the funds DOESN'T matter....deposits, transfers, interest....whatever you take OUT, you can put back in next tax year, in addition to the new contribution limit. The ONLY exception would be if you have not maxed out your contributions and have room within limits to re-deposit the same year (investment losses are not considered withdrawals...why would they be...you aren't withdrawing). PERIOD.

RetirEd said
I caution those planning December moves to be aware than withdrawals can be processed VERY slowly. Tangerine once took over three weeks, with a PHYSICAL CHEQUE being sent from Toronto. I lost weeks of interest and the receiving institution, in January, had to back-date the transaction.
RetirEd  

Why would you do a transfer to another FI in December? Of course it's going to take weeks (AND possibly pay a transfer fee). It's a registered account. I transfer funds every year on Dec 31 and have never had an issue. Just transfer out of your TFSA account and into regular savings account at the same FI (instantaneously) and move it from there. No cheques, no snail mail, no fees, no waiting. I did it when I had an account at Peoples on Dec 31 @ 10:00 PM (after interest was paid) and everything was credited with CRA properly.
It's not rocket science...pretty simple really.

smayer97 said
@Norman1 thanks for the info. It is good to know ... but do note that just for starters does not define "distribution" nor validate whether their impact on the cumulative annual limits, which was the main reason for this thread.

It doesn't need to. Anything not specifically defined in the Income Tax Act has it is common legal meaning.

It actually does show exactly the impact of distributions or funds coming out of a TFSA on the contribution room. Furthermore, it shows that the impact of distributions is not affected by the annual TFSA dollar limit.

Not sure where the idea comes from that the increase in contribution room from money coming out of a TFSA is somehow limited by the annual TFSA dollar limit.

The issue of losses in the TFSA is also clear. If one loses $5,000 within a TFSA, there is no way that TFSA can distribute that $5,000 out afterwards and increase the TFSA contribution room the following year by $5,000.