What are the TFSA Contribution Limits for 2022?
Curious about what you can claim and how to do it?
What is a TFSA?
The Tax-Free Savings Account (TFSA), introduced in 2009, is available to Canadians to save money each year, tax-free. Canadians that have a valid social insurance number (SIN) are able to get an account if they are 18 years old or older.
Various organizations are able to issue TFSAs. Banks, insurance companies, trust companies and credit unions are able to open a TFSA for you. There are three types of TFSAs. These include a deposit, an annuity contract, and an arrangement in trust.
You are able to have multiple TFSAs. One thing you need to keep track of is how much money you contribute to each TFSA. The total contribution amount of each must be below your contribution limit or there will be penalties.
What is tax-free?
Have you ever wondered what exactly is and isn’t tax-free in a TFSA? It can be hard to understand exactly what is tax-free. Any money you put into the TFSA, or contribution to the TFSA is taxed as normal. Then, any money made through the TFSA is not taxed. This could be money from a savings account, investments or more. You will also not pay any taxes that you take out of your TFSA.
You are able to use a TFSA to invest in a wide range of investment options. You are able to invest using any qualified investments. These include guaranteed investment certificates (GIC), exchange-traded funds (ETF), bonds, stocks, mutual funds and options. You will not pay taxes on any capital gains, interest or dividends made by investments from your TFSA. Also, money made by investments in your TFSA does not count to your contribution limit.
What are the contribution limits?
Ever since the start of the TFSA, there have been yearly contribution limits. They accumulate over the years from when you were eligible to open a TFSA. Since 2009, the contribution limit each year has increased based on inflation with the exception so far of 2015 with a $10,000 limit increase. The amount you can invest in a TFSA is not prorated. This means that as soon as you are eligible to contribute to a TFSA is when your contribution room will start to increase.
For example, If you were eligible in 2009 when the TFSA was first introduced, you can invest the maximum amount in a TFSA, which as of 2022 is $81,500. Another example is if someone turning eighteen or becoming a Canadian citizen this year wants to invest into a TFSA, their contribution limit would be $6,000. This is because the contribution limit for 2022 is $6,000. If you haven’t invested in your TFSA yet, you might have quite a bit of contribution room to start saving with. Not only that but as long as you are eligible your contribution room will increase whether you use it or not. So don’t worry if you feel behind on contributing to your TFSA.
The following table is the contribution limits that have been set so far.
| Year | Contribution Limit |
| 2009 | $5,000 |
| 2010 | $5,000 |
| 2011 | $5,000 |
| 2012 | $5,000 |
| 2013 | $5,500 |
| 2014 | $5,500 |
| 2015 | $10,000 |
| 2016 | $5,500 |
| 2017 | $5,500 |
| 2018 | $5,500 |
| 2019 | $6,000 |
| 2020 | $6,000 |
| 2021 | $6,000 |
| 2022 | $6,000 |
| Total contribution room as of 2022: $81,500 | |
What happens if you over contribute?
If you have contributed more than your contribution room limit then you will incur penalties. This is only for contributions to the TFSA. Money from investments does not count to this limit. If you have over contributed, then the penalty is to pay 1% of the amount you have over contributed per month. If you have gone over your limit, then the CRA will contact you the first time it happens. They will also allow you to withdraw the amount you have gone over before starting to charge you. For example, if you have contributed $1,000 over your limit and did not take out $1,000, then the charge will be $10 per month.
There are many ways to accidentally contribute more than your limit. Having multiple TFSAs can make tracking contributions more difficult. Also, one thing to keep track of is that if you have contributed to your limit, and then withdrew some money, that contribution limit does not come back immediately. Instead, that contribution limit will come back the following year. As an example, if you have contributed to your maximum, and then withdraw $1,000, then you will have to wait until next year to put $1,000 back into your TFSA.
How we can help
As your contribution room grows, and if you have multiple TFSA accounts, managing your TFSA can become complicated. Our experts at Heaquarters Inc. are here to help you with any investment TFSA management you may need. Contact us today and find out how we can help you.