All the Numbers

TFSA contribution room

From the All the Numbers wiki · Savings accounts

The tax-free savings account (TFSA) is the registered account with the simplest rule: money put in is not deducted, and growth and withdrawals are never taxed. What limits it is room, a running allowance that belongs to the person. This entry covers how room is built, how All the Numbers estimates it, and what it does when a contribution would not fit. For the other registered accounts, see RRSP room and the deduction and the First Home Savings Account. The savings accounts at a glance compare all of them.

The rules

  • Room accrues from the later of 2009 and the year you turn 18, for every year you are a Canadian resident. You do not need to have filed, earned anything, or opened an account — unlike an RRSP, room has nothing to do with income.
  • Unused room carries forward indefinitely. Someone who was 18 by 2009 and has never contributed has $109,000 at 1 January 2026.[1]
  • Withdrawals come back — the amount you take out is added to your room on 1 January of the following year, not immediately.
  • Room is a property of the person, not the account. Two TFSAs draw on one pool.
  • Over-contributing costs 1% a month on the highest excess amount in each month, for as long as it stays there.[2] See over-contributions.

Turning 18 is what starts the clock, even in the seven provinces and territories where the age of majority is 19 (BC, NB, NL, NS, NT, NU, YT). There you cannot open a TFSA until 19, but the room accrues at 18 and waits for you.

What the engine does

  • Builds your room from your birth year, and caps contributions at it. Money that will not fit stays in your other savings rather than disappearing — a clamp never destroys a dollar, it only moves it somewhere legal.
  • Adds a fresh year of room every 1 January, and returns last year's withdrawals with it.
  • Takes your own CRA figure if you give it one, and then stops assuming anything about your history. This is the accurate input: the plan cannot know what you have already contributed, and that is usually the biggest part of the answer.[3]
  • Refuses over-contributions rather than modelling the 1% penalty. A contribution that would not fit is cut back to the room left that month, and the part refused stays in cash rather than being posted as an excess.[4] The engine can tax a deliberate excess, but All the Numbers never asks for one, so a plan shows what you can legally do, not what it would cost you to break the rule. See money held as cash.

Limits after 2026

CRA announces each year's limit in the fall of the year before, so 2027 onward is not known. The plan does not guess it and does not publish one: it simulates one, by the rule the Income Tax Act sets out — the limit indexed to inflation and rounded to the nearest $500 (s. 207.01, indexed under s. 117.1) — using the inflation rate in your own plan. At 2% that puts 2027 at $7,500.[5][6]

Two things follow, and the plan holds to both:

  1. A projected limit is used only to cap contributions. It is never displayed as a published figure, and never cited as a source.
  2. The real limit will differ, because CRA indexes by a specific CPI average rather than by your assumption. A long plan's later years are an estimate of your room, not a promise.

The indexation carries the unrounded base forward rather than the published limit. That detail matters more than it looks: $7,000 × 1.02 rounds back to $7,000, so indexing the rounded figure would freeze the limit forever.

What it deliberately does not

Residency is assumed. A year you are a non-resident for the whole year accrues no room, and withdrawals made while non-resident only rejoin your room once you are resident again. That is a per-year question the plan never asks, so if you have lived outside Canada since 2009, your real room is lower than what you see here — get the figure from CRA and enter it.

Your history is assumed, unless you give us the number. Without it, the plan takes every year since you turned 18 and supposes you have contributed nothing.[3] That is the most room anyone of your age can have, so the plan leans generous until you enter the figure from CRA My Account, and the run says that it did so.

See also: income tax brackets and your marginal rate, the Guaranteed Income Supplement.

See also

  • Auto-allocation · When switched on, money left after spending and your own contributions is placed for you down a priority list — FHSA, then RRSP, then TFSA, then non-registered by default — each account taking what its room allows. Every dollar it moves is shown, by account, on each month and year.
  • Capital gains and the adjusted cost base · Selling an investment for more than its adjusted cost base is a capital gain, and half of it is added to taxable income in the year of the sale. Growth that has not been sold is not taxed.
  • Capital losses and the superficial-loss rule · A loss on a non-registered investment first cancels capital gains in the same year; any excess carries back three years or forward without limit. A loss is denied if the same investment is bought back within 30 days.
  • Contributions the plan could not fund in full · Each month's leftover joins cash, and each contribution takes what cash can give it, in the order the accounts are listed. A contribution that cash cannot cover is funded in part rather than by an overdraft that does not exist, and the plan says so.
  • Expected returns and fees · The default return is 6.35% a year, nominal and net of fees, for an 80/20 stock and bond portfolio. It is an expected long-run average, not a forecast, and an account's own rate replaces it.
  • Foreign withholding tax · A foreign country can withhold tax from dividends paid to Canadians; for US dividends the treaty rate is 15%. The foreign tax credit recovers it in a non-registered account, but a TFSA gets no recovery and an RRSP is exempt.
  • How dividends are taxed · Canadian dividends are grossed up by 38% (eligible) or 15% (other), taxed as income, then reduced by a federal and Ontario dividend tax credit. The credits make dividends tax less than interest at the same income.
  • Income tax brackets and your marginal rate · Federal and Ontario tax are each charged in slices of income at rising rates, then reduced by credits, with an Ontario surtax and health premium on top. The marginal rate is what the next dollar costs; the average rate is total tax over income.
  • Money you have not told the plan to invest · Income the plan does not spend and you have not allocated to an account is held as cash, earning the posted savings rate. It is not swept into an investment account, and it never over-fills a registered one.
  • Net worth, as the plan counts it · Net worth is everything the plan holds (cash, investment and registered accounts, homes at market value) minus mortgages, credit lines, debts and tax owing. It is not reduced for selling costs or for tax on money still in an RRSP.
  • Over-contributions to a TFSA or RRSP · Putting more into a TFSA or RRSP than your room allows is taxed at 1% a month on the excess. An RRSP has a $2,000 cushion that is not taxed. All the Numbers never lets a contribution exceed room, so a plan does not include this tax.
  • Renting versus buying · All the Numbers compares a plan that buys a home with the same plan that never buys, and the money the home would have taken stays in your accounts and is saved like any other leftover cash. It shows when owning pulls ahead on net worth, if it does. It is a comparison under assumptions, not a verdict.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • Tax brackets after 2026 are projected, not published · Every year after 2026 is taxed with the 2026 brackets, personal amounts, credits and CPP/EI ceilings grown at the plan's inflation rate. That is how CRA indexes them, but the real figures are announced each fall and will differ.
  • The First Home Savings Account · $8,000 a year with one year of carryforward and $40,000 for life, deducted from income and withdrawn tax-free for a first home. The refund is credited the following April, and the account winds up into an RRSP if it is never used.
  • The Guaranteed Income Supplement · A tax-free top-up to Old Age Security for pensioners with little other income. It falls by 50 cents for every dollar of other income (75 cents through part of the range); RRSP and RRIF withdrawals count against it, TFSA withdrawals do not. The projection estimates it on the previous year's income.
  • The savings accounts at a glance · The TFSA, RRSP, FHSA, RESP, RRIF and non-registered account each have their own room, tax treatment and withdrawal rule. This page gives one short paragraph on each, with the entry that covers it in full.
  • Where the down payment comes from · The cash to close is assembled from the plan's projected balances in a fixed order — FHSA, TFSA, unregistered, HBP, then taxed RRSP — and each dollar is priced for what taking it costs.
  • Who the plan is about · A plan covers one person or two. Where a birth year is missing the plan assumes the person is 40 and born on 1 January, says so on the page, and uses that age for tax, pension and account rules until the real one is entered.

References

  1. ↑CRA — Tax-Free Savings Account (limits table); 2023-2026 via canada.ca calculate-room page; earlier years · TFSA annual dollar limits 2009-2026 · See the source · effective 2009-01-01
  2. ↑ITA 207.02 ("1% of the highest such amount in that month"); 207.01(1) "excess TFSA amount" · Part XI.01 tax a month on the highest excess TFSA amount in each calendar month · 1% · effective 2009-01-01
  3. ↑CRA — TFSA contribution room accrues from 2009 or age 18, resident; our convention · TFSA room not given is taken as every verified annual limit from the later of 2009 and the year the holder turned 18, with nothing ever contributed — the most room anyone of that age can have — until the CRA My Account figure is entered; reported on the run · See the source · effective 2026-09-20
  4. ↑CRA — TFSA/RRSP/FHSA over-contributions are taxed 1% a month (ITA 207.02, 204.1, 207.021); our convention · A contribution event flagged contributes no more than the TFSA/RRSP/FHSA room left that month (deducting no more than it contributed); what the room refuses stays in cash, never posted as an excess · effective 2026-09-20
  5. ↑tfsalimit.ca per-year unrounded indexation math (2026: $7,044.04 x 1.020 = $7,184.92 -> $7,000); rule corroborated by Fidelity Canada and the CRA indexation FAQ; statutory basis ITA s.207.01 indexed under s.117.1 · TFSA dollar limit, unrounded indexation base — carried forward and re-indexed to project later years, never the rounded limit · $7,184.92 · effective 2026-01-01
  6. ↑CRA — Tax-Free Savings Account (limits indexed, rounded to the nearest $500); statutory basis ITA s.207.01(1) "TFSA dollar limit" · TFSA dollar limit: the indexed amount is rounded to the nearest multiple of this · $500 · effective 2010-01-01