The Tax-free Savings Account (TFSA) is one of the most popular savings vehicles in Canada. And for good reason – it offers tax-free growth on your savings. But there is a limit to how much you can contribute to your TFSA annually and throughout your lifetime.
In this blog post, we will discuss the current TFSA lifetime limit and what you need to know about it! We will answer the question: “What is the TFSA lifetime limit?” and provide some tips on how to make the most of your TFSA.
If you are looking to take advantage of the benefits of TFSA to save for retirement or any other financial goals, or just want to learn more about TFSAs in general, then this blog post is for you!
Lifetime Limit for TFSA
The lifetime limit for TFSA is $88,000 in 2023 for Canadians that have never contributed to their TFSA and were eligible to contribute to the account since its inception in 2009.
Also known as the lifetime TFSA contribution room, the TFSA lifetime limit is the sum of all the annual TFSA limits since 2009. See the table in the next section.
If you have contributed to a TFSA in previous years, your lifetime contribution limit will be less than $88,000. For example, if you have always maximized your TFSA room since you became eligible, you’ll only have a TFSA contribution limit of $6,500 as of January 1, 2023.
To summarize: while the lifetime limit for TFSA as of 2023 is $88,000, be aware that your own lifetime limit may be lower if you:
- have contributed to the TFSA in the past
- were not 18 in 2019 when TFSA was introduced; or
- were not a resident of Canada in some years since 2009
Annual TFSA Limits Since Inception
The TFSA contribution limit for 2023 is $6,500. The annual TFSA contribution room is benchmarked to inflation and rounded to the nearest $500.
If you have never opened nor contributed to the TFSA, your TFSA contribution limit as of January 1, 2023, will be the total of all annual contribution limits since the latter of 2009 (when the TFSA was introduced) or the year you turned 18, as seen in the table below:
| Year | TFSA Limit | Lifetime Limit |
|---|---|---|
| 2009 | 5,000 | 5,000 |
| 2010 | 5,000 | 10,000 |
| 2011 | 5,000 | 15,000 |
| 2012 | 5,000 | 20,000 |
| 2013 | 5,500 | 25,500 |
| 2014 | 5,500 | 31,000 |
| 2015 | 10,000 | 41,000 |
| 2016 | 5,500 | 46,500 |
| 2017 | 5,500 | 52,000 |
| 2018 | 5,500 | 57,500 |
| 2019 | 6,000 | 63,500 |
| 2020 | 6,000 | 69,500 |
| 2021 | 6,000 | 75,500 |
| 2022 | 6,000 | 81,500 |
| 2023 | 6,500 | 88,000 |
How to Calculate Your TFSA Limit
Your TFSA limit is calculated as the lifetime TFSA limit minus all your TFSA contributions in previous years plus the TFSA withdrawal from the prior year.
Here’s an illustration:
Let’s assume you’ve always maxed out your annual TFSA limit since its inception in 2009. At the end of 2021, you would have contributed $75,500 to your TFSA.
Your 2022 TFSA limit will therefore be $6,000 ($81,500 – $75,500), if you made no withdrawals in 2021. If you did, simply add the amount withdrawn to the $6,000 to get the amount you can contribute to your TFSA in 2022.
It is very important to track your TFSA contributions and withdrawals because if you over-contribute, you will be subject to a penalty tax of one percent on the over-contribution amount.
You can download a TFSA contribution template and learn more about TFSA withdrawal rules.
Related: Can I have Multiple TFSA accounts?
Where to Confirm Your TFSA Limit?
Not sure what your TFSA limit is? The Canada Revenue Agency (CRA) will send you a notice of assessment for your TFSA after you file your taxes each year.
The notice will contain your TFSA contribution limit for the year, after adjusting for your prior years’ contribution and withdrawal activities.
You can also check your TFSA contribution room by logging into your online CRA MyAccount.
However, please be aware that the CRA calculates the limit using the information provided by your financial institution(s), so there may be some delays and the record available to CRA may not be up to date.
To confirm, you can click on “View TFSA Details” to reveal more options and review your Transaction Summary for the year.
How TFSA Withdrawals Affect TFSA Contribution Limit
The ability to save, invest and grow your money tax-free is one of the biggest advantages of a TFSA.
But it’s important to know that any withdrawals you make from your TFSA will not only be tax-free but will also contribute to your future TFSA contribution room.
In other words, any money you take out of your TFSA can be re-contributed the following year without affecting your annual contribution limit.
This is different from a Registered Retirement Savings Plan (RRSP), where withdrawals are considered taxable income and cannot be re-contributed.
For example, let’s say you’ve maxed out the full $81,500 TFSA lifetime limit by June 2022. Then in October 2022, you withdraw $20,000 from your TFSA.
In 2023, you will be able to contribute $20,000 back into your TFSA on top of the new annual contribution limit of TFSA. Since the TFSA annual dollar limit is $6,500 in 2023, you’ll be able to contribute a total of $26,500 in 2023.
What is TFSA?
A Tax-free Savings Account (TFSA) is a tax-advantaged investment account that lets Canadians save and invest money on a tax-free basis. Contributions made into the account are not taxed and grow tax-free, and withdrawals from the account are also not taxed.
The TFSA was introduced in 2009 by the Federal government, and the program is administered by the Canada Revenue Agency (CRA).
Unlike the RRSP contribution limit that is calculated using your previous year’s earned income, the TFSA contribution limit is the same for all eligible Canadians no matter their income level.
That means you don’t need to have taxable income from the previous year or even file your taxes to get TFSA contribution room. The annual TFSA dollar limit is automatically available to every eligible person on January 1 every year.
Learn more: TFSA Guide
How to Use the TFSA Lifetime Limit?
Now that you know what the TFSA lifetime limit is, let’s discuss how you can make the most of it! Here are a few tips:
- Use your TFSA to save for short-term and long-term goals
- Invest in a variety of assets, such as cash, stocks, bonds, and mutual funds
- Review your TFSA contributions and withdrawals regularly to make sure you stay within the limit
Final Thoughts
It is always a good idea to max out your TFSA limit if you can. Not only will you benefit from tax-free growth on your investments, but you will also have the flexibility to withdraw funds without affecting your future contribution room.
But to make the most of the account and avoid TFSA penalties, it is important to know your TFSA annual limit. So take steps to confirm your TFSA contribution room today and track your contributions and withdrawals going forward.
If you have any questions about the TFSA lifetime limit or how to make the most of your TFSA, please feel free to leave a comment below. We would be happy to help!
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