TFSA Contribution Room Explained | What Happens To Your Contribution Room When Your TFSA Grows?
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- เผยแพร่เมื่อ 26 ก.ค. 2024
- Learn more about our services here: www.parallelwealth.com/planning
We've done a lot of videos on TFSAs, but there still is a little confusion around contribution room when your TFSA grows/shrinks. It's important to know the details around contribution room, as you may be leaving a good portion of your contribution room on the table.
If you have any further questions about this video's topic or any financial planning questions in general, I encourage you to find a certified financial planner in your area or book a consultation with us to get your savings plan on track. You can learn more about our services at www.parallelwealth.com/planning or email Info@Parallelwealth.com
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0:00 - Introduction
0:51 - Max TFSA Contribution
1:57 - What Happens When Your TFSA Grows?
5:37 - What Happens When Your TFSA Shrinks?
6:56 - Summary
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DISCLAIMER: The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adam Bornn is not registered to provide investment advice and as such does not provide recommendations - those looking for investment advice should seek out a registered professional. Adam is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.
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Super helpful! Thank you SO much! This is the overview of how the TFSA contribution room works that's rarely explained on the internet!
That was the explanation that I was missing on TH-cam about TFSA. So often people stick to the basics only when they try to explain it.
So I've been looking at investments videos for a while now... once I started looking at Adam's videos I learned that I don't have to look any further. Adam talks like a real person, straight forward information, clear and concise. The best on TH-cam
Too kind Scott! Thanks for watching.
Thanks for a very clear explanation. You could have added another example if you have reached $90,000 but you took out only $50,000 out of $90,000 in 2021, then on January 1, 2022, your new contribution room will be $50,000 plus $6000. Kind regards
Great explanation of how a TFSA works and thank you very much. I somewhat understood how it works but still had some misunderstanding and questions of the withdrawll and room. NOW I get it more.
Thank you, Adam
Hi Adam,
Thank you very much for this video. I did not understand the contribution room in relations to growth until now. I am now Crystal clear on how it works, thanks to you!!!
Thank you so much for this video, it's exactly what I am going through and didn't think there was a video to find the answer... You Rock!!!
Glad it was helpful!
Hey Adam could you make a video on the tax implications of transferring funds from a non-registered account into a TFSA? Why it would be potentially beneficial or not etc. Thanks, love the content you've been putting out around TFSA's!
Thank you so much! You answer exactly what I am looking for.
Thanks. Very nicely explained. Very clear. All these questions were on my mind. Thanks.
Very clear explanation.
Thank you so much I understand now
Thanks mate
Thanks for vindicating my understanding. I did exactly what you explained took money out to invest in RE. (110K in Aug 2020) and put 116K back in Jan2021 - did not know what the rules were, just winged it - hoping a call from CRA which never materialised. - Now I Know Why. Thanks for clarifying this. appreciated.
Thank you so much man. I was so confused how losses would affect my contribution
Mason, glad it helped.
Hey Adam so even if my return on a stock drops I should remove it . Only if it’s necessary for the benefit of widening my contribution room?
Love your vids. Here is something you might find interesting for a future episode. I've started thinking I might be better off starting a RIF early, and withdrawing as much as I can while staying is the same low tax bracket, and using the funds I don't need to live to max out my TFSA. If I do this, I could potentially avoid being forced into higher annual RIF withdrawals in the future that push me into a higher tax bracket. It seems like a good strategy to achieve the goal of paying minimal income tax on RRSP (which turns into RIF) savings over my life, but I'm fuzzy on if there is a downside.
I have a few videos on this - RRSP meltdown is the term most use. It's a great strategy for most.
@@ParallelWealth I did a search on "RRSP meltdown" on your channel and nothing jumped out at me. Do you have any specific links relevant to this idea?
Thank you very much for your helpful information. I wonder if we take money any month in 2023 then if we want to put back in 2024 then can we put it back in January 1 or any month in 2024 or do we have to wait for the month we took the money out, are they counting it as fiscal year or calendar year?
One question that I have about TFSA's involves residency requirements. I understand that you do not accrue contribution room in years that you are living outside of Canada, but if you had unused contribution room when you left Canada can you still contribute using that contribution room while you are living outside the country or does the TFSA become locked out while you are living outside of Canada. Also, if you are only out of the country for part of the year do you still lose that years contribution (say for example a student who is doing a university exchange year outside of Canada leaving in September and coming back the following August)? My daughter is in this situation as she did an exchange year in Japan and may be returning there to teach english in the future and still has lots of contribution room in her TFSA.
Hi Adam, I also wonder so if the money has grown, if a lot it is still ok, we don't have to take it out and they won't say that we are over the limit and have to pay penalties.
Thanks very much for producing these videos. They're very informative. Is there any strategy for a couple who have roughly equal amounts of TFSA investments but want to take out a large amount for a purchase? eg. Does it make sense to split the cost between the two accounts or maybe take it from the larger of the two? Or does it make no difference?
No difference as long as investment strategy is the same in both
Thank you for all of these great videos Adam. Is it better to maximize on RRSP or TFSA if you are in a high income tax bracket and retirement is on the horizon? TIA
I still prefer the RRSP. Many disagree with me 😉 but the numbers and tax savings speak for themselves when we run the scenarios in our software.
@@ParallelWealth Thank you! Those were my thoughts also.
so it's basically the amount of your withdrawals + $6000
When we sell the stock that we have in TFSA or the dividends we recieve do they count towards the contribution room?
It's important to distinguish between the yearly contribution room, and the contribution room that comes about when you withdraw any money. Adam already did the one where you put the max in (for 2021) and it grew to $90k, and you withdraw the full amount.
Here's another one that's kind of in-between. The max for 2022 is 81.5k and you have never contributed anything. You contribute 40k, leaving 41.5k of unused contribution room. During 2022, your investment grew to 100k (including dividends) and you decide to withdraw the full amount on Dec 1 2022. Your contribution room for 2023 = (what you withdrew in 2022) + (unused contribution room) + (2023 yearly contribution room increase). Assuming that the contribution room increase is 6k, that means you can put in 100k + 40k + 6k = 146k.
Here's another example that's slightly different. You contribute 40k, leaving 41.5k of unused room. That 40k grew to 100k in 2022. You decide to contribute 10k more on Nov 1 2022, which leaves you with 31.5k of unused room and 110k in the TFSA. On Dec 1 2022, your investment falls to 50k and you withdraw the full amount that same day. Using the formula above, your contribution room in 2023 = 50k + 31.5k + 6k = 87.5k.
Great video Adam! Question; the 2024 TFSA contribution room as per the CRA website says $24k. Does that mean its the remaining amount i can still contribute considering my $ in TFSA already OR does that mean its my total including whatever is in TFSA already?
What you can still put in. The 2024 number will only be updated once you file your 2023 taxes.
Is it the same thing if you don't max out your TFSA?
Let's say I put 10K and 2018, it grew to 20K and I took it all out in 2021, will my 2022 max contribution be 75500+6000 or 75500+10000+6000?
thank you!
The ladder. You keep the gains as contribution room.
Hey Adam. Question. I never contribute to my TFSA and I will have 75k. but this year I contribute 12k. Does it affect my contribution limit in a year?
Not sure I get this exactly. The $12k grew to $75k or you started the year with $75k and only deposited $12. Either way you will have $63k of contribution room left.
@@ParallelWealth Thank you for your reply Adam. I just deposited 12k this year.
Can you transfer part of your RRSP into your TFSA without tax consequences?
No, anytime you pull from an RRSP it's taxable income. There are videos out there showing ways to get around this, but it's concepts not approved by CRA
Hi Adam, My CRA account says I have 75500 room in my TFSA, however I only immigrated to Canada in 2013, therefore I calculated that it I should only have 55500, is this correct? Please could you clarify? Thanks Tim
Ya doesn't sound right. You would have to call them to check. I think there is a contact number on the canada.ca webpage
What happens when I max out my contribution for 2021, but I have been withdrawal $4000 out of $6000 only this year for an emergency. In previous years never max out , so can I continue contributing this year for the room I have from previous years? Where can I find this information? Thanks so much for your help
Yes but you can confirm numbers on your my service canada site
so I'm limited to investing only $6000 through my tfsa?
Hey Adam just need to clarify a scenario. Say I have a contribution room of around 35,000 for the year 2021 but I put in 10,000 and lost around 3,000 worth of investments. I take out the 7,000 and I am left with 25,000 for the year of 2021. Would my contribution room for 2022 still be 41,000 or will it drop down to 32,000? And what would happen if I made 3,000 and pull out 13,000, would my contribution limit for 2022 increase to 44,000?
In the first scenario where you lose $3k the contribution room in 2022 would be $25k+$7k+$6k (new contribution room) = $38k. The second scenario you are correct in that it would be $44k.
@@ParallelWealth thank you for the clarification
In my Canada Revenue Agency it shows me a 36k contribution room, does it mean I can add that amount to my TFSA account?
Not necessarily. Make sure to check what they have recorded as contributions - they might be missing something. But if not, then yes this would be your limit you could put in.
@@ParallelWealth if your tfsa account had 30k right now, what is the maximum limit you can deposit as of this year? Some people have morethan 70k in their tfsa. Thank you!
that means that if I turn 18 on 2020 I can safely deposit 12k, right ? cause the contribution room from 2021 +2022 is 12k all together, right ?
If you turned 18 in 2020, then it would be $18k - because you would have 3 years of contributions.
@@ParallelWealth thank you
I have 41,500.00 in my contribution room what should I do?
What happen if I pull out 90K this year 2021 and didn’t contribute for 2022, how much room I will have on year 2023? Thanks
Any previous year carry over + 90k + 6k for 2022 + 6k for 2023
wait so i took out around 1000 cad from my tfsa in 2020 and youre telling me thats how much contribution room i have for 2021 (+6000 cad)? thats horrible. anyone have any ideas of what can i do?
No no no...you also carry forward any unused contribution room as well. This video highlights what happens when you make or lose money in your TFSA and the affects of your contribution room. Any unused room is still there for you
@@ParallelWealth thank you for clearing that up for me!love your channel!
Can you put crypto in a Tfsa
Yes and I did a full video on this. You can buy crypto ETFs in your TFSA
What if I only pulled out 15k out of the 90k what would my contribution room be? 21k? But then I have $75,500 in there I’m confused now
On Jan 1st the following year add 3 things: what you took out, carryover contribution room, new contribution room for the year. So $21k in this example (15k+0+6k)
@@ParallelWealth hmm okay so if I had 90k contribution room and I withdraw 15k in dec of Dec2021 by jan 2022 I will have a contribution limit of 21k correct ? Which means bc I pulled out some I lost the space right?
I tired to explain TFSA's to someone. I called it a tax free investment account that allows me to avoid taxes on some of my investments, and they said, "...yeah but, when you take it out, you have to pay tax on it".
FACEPALM.
Where did I go wrong with my explanation?
Welcome to my job...lol
If I turned 18 in 2020 then I would have 18,000 as of 2022, correct?
Correct.
Adam - my question has a twist. Say you maximized contributions then too out 50K. The following Jan. 1st you would be able to contribute $55,500. But... what if you only repurchased $25,500 in the following year. Would the extra $25K room be lost if not recontributed in that subsequent year or would it carry forward to the next year and all that amount still be available to replace or would you then lose that contribution room?
Carried forward.
@@ParallelWealth Thanks! Great tool and straight up information!
I'm needing to purchase a (used) car soon (hoping I can hold out until the Winter or Spring b/c crazy prices). I am currently semi-retired, so living partially from dividends from my margin account as well as part-time work and side business. I'm mostly leaving my TFSA and RRSP alone until I fully retire. However, I am wondering which fund I should pull from for my car purchase? Maybe it makes sense to pull from my TFSA before the end of the year, as it has grown considerably. Or should I take it from my margin account? My income has been low this year, so perhaps I might even dip into my RRSPs for the car. Any suggestions?