Understanding TFSA Contribution Limits: Why You Should Always Double-Check Before Depositing
Understanding TFSA Contribution Limits: Why You Should Always Double-Check Before Depositing
At MAM CPA, we frequently advise clients on the use of Tax-Free Savings Accounts (TFSAs)—a powerful tool for tax-sheltered growth. However, one recurring issue we encounter is confusion around contribution limits and how they’re presented by the Canada Revenue Agency (CRA). Misunderstanding these limits can lead to costly penalties, so we want to clarify how TFSA contribution room works and why it’s essential to verify your available room before making any deposits.
How CRA Reports TFSA Contribution Room
Each year, the CRA updates your TFSA contribution room based on information submitted by financial institutions. From our experience, these updates are not reflected in your CRA My Account until at least March or April of the following year. This means the amount shown as of January 1 is often incomplete or outdated, especially if you’ve made contributions, withdrawals, or transfers in the previous year.
To avoid overcontributing, we strongly recommend reviewing two full years of TFSA transactions—not just the current year—and confirming your available room directly with your TFSA provider.
Don’t Forget About Multiple Accounts
Another common oversight is forgetting about TFSA accounts opened at different institutions. While CRA receives data from all TFSA issuers, delays and reporting errors can occur. If you’ve opened multiple accounts over the years, it’s your responsibility to track all activity across them. Even small or inactive accounts can affect your total contribution room.
TFSA Contribution Room: Frequently Asked Questions
Here are some of the most common questions we hear from clients—and the facts to help you stay on track:
If I withdraw money from my TFSA mid-year, can I re-contribute it right away?
🚫 Not yet. Withdrawals only increase your contribution room starting January 1 of the following year. Re-contributing too soon can lead to overcontribution penalties.
Is the TFSA contribution room shown in my CRA account always up to date?
🚫 No. CRA’s TFSA Room Statement is only accurate as of January 1, and from our experience, it’s not fully updated until March or April. It doesn’t reflect any contributions or withdrawals made during the current year or late-reported transactions from the previous year.
Does CRA automatically track all my TFSA accounts together?
🚫 Not reliably. While CRA receives data from all TFSA issuers, reporting delays or errors can happen. If you have multiple accounts, it’s up to you to track your total activity.
Do small transactions like dividend reinvestments count toward my limit?
✅ Yes. Every deposit—no matter how small—counts toward your annual contribution limit. Even automated or recurring transactions can add up.
Our Recommendation
We strongly advise all clients to:
Track your TFSA contributions and withdrawals independently
Review at least two years of transactions to confirm accuracy
Confirm your available room directly with your TFSA provider
Avoid relying solely on CRA’s My Account figures for current-year decisions
If you’re unsure about your contribution room or have made recent transactions, reach out to your financial institution or contact us for assistance. A quick check can save you thousands in penalties and ensure your TFSA continues to work in your favour.