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Email this12:06 pm
February 22, 2024
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Hi, I joined a while back but this is my first post. Can anyone tell me if I'm understanding TFSA rules correctly:
Let's suppose for this year I have $30,000 contribution room and I contribute $10,000 in the form of a GIC or some other investment. I will have $20,000 contribution room left for this year, correct?
Keeping with the above scenario, if sometime this year I also withdraw $5,000 I will still have $20,000 contribution room but if I put back the $5,000 later this same year my contribution room for this year goes down to $15,000. Is that right? And if so next year my contribution room will be $15,000 + whatever the contribution limit is for next year, but if I don't put back the $5,000 this year, my next year's contribution room will be $20,000 + the $5,000 withdrawal + whatever the contribution limit is for next year.
Did I get it right or am I missing something?
12:31 pm
October 7, 2019
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In your example if the second contribution is made of $5,000
This year's contribution room is $30,000 - $10,000 - $5,000 = $15,000 remaining
Next year's contribution room is
$15,000 remaining from previous year + $5,000 previous year's withdrawal + $7,000 next year's additional contribution room = $27,000
Where people get in trouble is when the have say $0 contribution room and they withdrawal $10,000 and recontribute $10,000 the same year they have in fact overcontributed by the $10,000. Just remember that this year's withdrawals don't increase your contribution limit until the following calendar year
1:50 pm
January 12, 2019
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.
All you need to know, and more . . .
- CRA TFSA Guide For Individuals ➡ https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4466/tax-free-savings-account-tfsa-guide-individuals.html
Take notes 
- Dean
" Live Long, Healthy ... And Prosper! "
3:41 pm
February 22, 2024
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I'm a bit confused, are you saying that even though the $5,000 withdrawal is put back into the TFSA it can still be added to next year's contribution room?
If the $5,000 is not put back into the TFSA does the contribution room remain at $20,000 for this year ($30,000 room - $10,000 contribution)?
CRA website didn't help but CRA agent told me withdrawals don't affect the contribution room, only contributions do, I know that but contributing and withdrawing is confusing me.
4:10 pm
October 27, 2013
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You cannot withdraw $5000 this year and re-contribute it back this year without using an additional $5000 of available contribution room. You have to wait until the following year to do that. To use a few examples:
1. $30k contribution room at current time. You contribute $10k and that leaves $20k of contribution room left for this year. You pull out $5k later this year. Contribution room left for this year remains at $20k.
Next year you have $20k of contribution room + $5k that you pulled out this year + next year's $7k (assuming no change).
2. $30k contribution room at current time. You contribute $10k and that leaves $20k of contribution room left for this year. You pull out $5k later this year. Contribution room left for this year remains at $20k. However, if you then contribute another $5k into the TFSA yet this year, available contribution room drops to $15k
Next year you have $15k of contribution room + $5k that you pulled out this year + next year's $7k (assuming no change).
You end up in the same overall place next year because example 2 contribution room is $5k less to account for the extra $5k that you contributed this year. It is a wash once Jan 1, 2026 comes along.
Edited later to reflect Norman's point in post #6. Poor choice of words on my part to say 'put back'.
4:27 pm
April 6, 2013
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There's no such thing as a "put back" with TFSA's.
If one withdrew $5,000 from a TFSA and then deposited $5,000 into a TFSA in the same year, one has made $5,000 of TFSA contributions that year. One better have had at least $5,000 of TFSA contribution room that year!
If one withdrew $5,000 from a TFSA, deposited $5,000 into a TFSA, withdrew $3,000 from a TFSA, and deposited $3,000 into a TFSA, all in the same year, then one has made $8,000 of TFSA contributions that year.
Those are the consequences of the TFSA rules which add a TFSA withdrawal to the TFSA contribution room for the next year, not to the room for the year the withdrawal was made.
4:37 pm
October 7, 2019
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Here's how it works:
- Withdrawals Are Added Back the Next Year: Any amount you withdraw from your TFSA in a given year is added back to your contribution room at the beginning of the next calendar year. This means you can recontribute the withdrawn amount starting January 1 of the following year without penalty.
For example, if you withdrew $5,000 in 2024, that $5,000 would be added to your contribution room on January 1, 2025.
- Contribution Room Rules: If you still have unused contribution room in the same year as the withdrawal, you can recontribute without waiting until the next year. However, if you’ve already maxed out your TFSA contribution limit for the year, you must wait until the following year to recontribute. Otherwise, you risk over-contributing and incurring a penalty of 1% per month on the excess amount.
- Annual Contribution Limit: Each year, a new annual TFSA contribution limit is added to your existing room. For example, if the annual limit for 2025 is $7,000 and you withdrew $5,000 in 2024, your total contribution room for 2025 would include:
Any unused room carried forward from previous years plus,
The $7,000 new limit for 2025,
The $5,000 withdrawn in 2024
4:54 pm
September 11, 2013
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I've never understood why this is so confusing.
1. Withdrawals have no impact on the same year's contribution room.
2. Withdrawals are added to next year's contribution room.
Isn't that it?
5:54 pm
October 27, 2013
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Bill said
I've never understood why this is so confusing.1. Withdrawals have no impact on the same year's contribution room.
2. Withdrawals are added to next year's contribution room.Isn't that it?
Indeed!
6:00 pm
January 12, 2019
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Bill said
I've never understood why this is so confusing.
1. Withdrawals have no impact on the same year's contribution room.
2. Withdrawals are added to next year's contribution room.Isn't that it?
- Yes ⬆ ❗
Thanks Bill ... some times, the 'Simplest Answers' are the Best.
- Dean
" Live Long, Healthy ... And Prosper! "
7:03 pm
February 22, 2024
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Thank you everyone for the replies, I knew that unused contributions and withdrawals can be carried over to the next year, but I didn't know that a withdrawal that was "re-contributed" back into the TFSA is also carried over to the next year.
9:32 pm
September 29, 2017
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Not sure if you are getting it, based on the wording of your last reply.
Do not think about any contributions as "re-contributions", or "put-backs", or any such language.
Any contribution can only be made if you have contribution room left. As Bill put it simply, "2. Withdrawals are added to next year's contribution room."
So contribution room in any given year =
Contribution room remaining from previous year
+ withdrawal amounts in previous year
+ new contribution defined for current year
- contributions made in current year.
10:07 pm
October 21, 2013
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I think it's the way you are looking at it and thus the vocabulary you are using which are confusing you.
If you eliminate phrases like "put back", "recontribute", and "carry forward', and stop thinking of it as a very specific nest egg of 5000 , it may be easier. CRA is indifferent to whether you view it in these terms. CRA only knows "contribute" and "withdraw". "Recontributions", "putting back" etc don't exist. I would also get rid of "carry forward" as you can only carry forward room that existed throughout the previous year.
Bill's crisp summary is quite correct. but it is also counter-intuitive and illogical, and, thus, people have trouble following it. It makes no sense to tell someone that if they remove money on Jan 1, they have to wait until the following january to "put it back" (the way most of us would think of it) when the fellow who withdraws Dec 31 can put it back two days later!
6:19 am
March 30, 2017
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Any deposit will reduce your remaining CURRENT year contribution limit
Any withdrawal will not bump up / add back to your remaining CURRENT year contribution limit
Withdrawal will INCREASE your FUTURE year contribution limit.
9:07 am
February 22, 2024
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I think you guys are making it more confusing with the lingo of what is the correct wording. Here is what I understand:
Scenario 1
Year 2025
contribution room: $30k
contribution: $10k
remaining contribution room: $20k
withdrawal: $5k
contribution room remains at $20k
contribution (the so called "put back"): $5k
contribution room drops to 15k
contribution room for next year: $15k unused contribution + $5k withdrawal + $7k(assuming it's same) = $27k contribution room for year 2026
Scenario 2
Year 2025
contribution room: $30k
contribution: $10k
remaining contribution room: $20k
withdrawal: $5k
contribution room remains at $20k
contribution room for next year: $20k unused contribution + $5k withdrawal + $7k (assuming it's same) = $32k contribution room for year 2026
Did I get that right?
10:59 am
September 11, 2013
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Looks good to me, assuming no other unused contribution room from before 2025.
5:41 pm
September 29, 2017
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itsme said
...
Did I get that right?
What you presented is correct in both cases. And as Bill points out, assumes no contribution room created from any withdrawals during 2024.
Also, I suggest you eliminate the "put back" language to avoid future confusion.
Please write your comments in the forum.