Every year, the government calculates how much TFSA contribution room you have available.

If you've contributed to your TFSA in the current year, that amount won't be reflected in your total contribution room. But if you haven't, you can log into CRA My Account to check your current contribution room.

You can calculate your TFSA contribution room by summing up:

• The current year's contribution limit
• Unused contribution room from previous years
• The withdrawals from your TFSA in the previous year

To illustrate this with an example, let's say in 2022, you contributed $4,000 to your TFSA with a contribution room of $6,000. You then withdrew $1,000 few months later. In 2023, you'll have a contribution room of that year's $6,500 plus the $3,000 from the previous year.

Tracking your TFSA contributions is crucial to stay on top of your contribution room availability. Over-contributions may cost you a penalty of 1% per month based on the highest excess TFSA amount in your account for each month in which an excess remains. You can use the formula above to calculate your contribution room. Keep in mind that your previous year's contribution or withdrawal might not be reflected in your current contribution room until after the end of February.

Each year, your TFSA annual contribution room is reset on January 1.

You can-carry forward any unused contribution room into future years indefinitely. For 2024, you can contribute up to $7,000 PLUS any unused contribution room from previous years.

If you contribute more than your contribution limit in the current year, you may be subject to a penalty tax of 1% per month, every month the excess amount stays in your account, based on the highest excess TFSA amount in that month. In the case of over-contribution, please consult with your tax advisor.

Full details on the implications of over-contributing to your TFSA can be found on the CRA website here.

You can withdraw funds from your TFSA any time you want¹ and you don’t have to reach a certain age before you withdraw your money. Withdrawals made from your TFSA will be added back to your TSFA contribution room the following year. Your financial institution can help you make withdrawals from your TFSA.

There is no limit on how much you can withdraw from a TFSA. If you do withdraw funds from your TFSA, it doesn't reduce the total amount of contributions you've already made for the year.

For example, Joe contributes the maximum TFSA dollar amount from 2012 all the way through to the end of 2020. In 2021, he contributes $2,000 with a remainder of $4,000 contribution room. In 2022 he doesn't contribute anything but withdraws $1,000 from his account. So, his contribution for 2023 will be:

Remainder room from 2021 ($4,000) + Withdrawal amount in 2022 ($1,000) + current year's allotment ($6,500) = $11,000

More information can be found on the official CRA website here.

If you withdraw from your TFSA, you do not permanently lose your contribution room. You can re-contribute amounts you have withdrawn in the following year or years and your contribution room carries forward indefinitely.

No, you don’t have to pay income tax on the amounts you withdraw. As TFSA withdrawals don’t count as taxable income, provided the income is from eligible products and investments. they don’t affect federal income-tested benefits or tax credits you may receive, including the Canada Child Benefit program, the Canada Workers Benefit, the Good and Services Tax/Harmonized Sales Tax (GST/HST) Credit, and the Age Credit.

TFSA withdrawals also won’t reduce benefits based on your income levels, such as Old Age Security, the Guaranteed Income Supplement and Employment Insurance benefits. More information can be found on the CRA website here.

Anything you want. You could wait until you retire and use it to supplement retirement income you may have from pensions, RRSPs or other sources, you can also use it for short-term savings goals like a new car or a vacation, or for needs that arise suddenly like repairs to your home.

A TFSA means you may not be taxed on any of the growth or income earned from eligible investments or products within the account. This means your savings can grow faster. Want to know by how much? Use our TFSA Calculator to calculate now.

See what types of TFSAs TD offers and start growing your money tax-free. Get started.

For more information on how investing in a TFSA can help you reach your savings goals, book an appointment and visit a branch at a time that’s convenient for you. A TD advisor can help you find out whether a TFSA can meet your savings and investment goals.

Already have an EasyWeb account? Apply online and fill out an online application if you already have a TD Canada Trust chequing or savings account.