A TFSA contribution tracker can help you avoid the penalty that comes with TFSA over-contributions. And if you’ve over-contributed, a penalty calculator will let you compute how much you may have to pay.
The Canada Revenue Agency (CRA) expects each TFSA holder to keep accurate records of the transactions in their TFSA.
But keeping track of your TFSA contributions can be difficult especially if you have more than one account at different financial institutions. So it is unsurprising that over-contribution is one of the common TFSA mistakes that Canadians make.
TFSA Contribution Room
Each year on January 1, every Canadian resident that is 18 or above, and with a valid SIN gets an increase in their contribution room.
The TFSA dollar limit for 2020 is $6,000 and the limit remains unchanged for 2021.
But your contribution room can be higher than the annual TFSA limit if you have unused contribution room from previous years.
The TFSA contribution room is calculated as the sum of the following:
- The TFSA dollar limit for the current year
- unused contribution room at the end of the previous year
- total TFSA withdrawals from previous year
So if you were aged 18 in 2009 when TFSA was introduced and you’ve never opened or contributed to a TFSA, your accumulated TFSA contribution room in 2021 will be $75,500.
The implication of (b) is that you can always carry over your TFSA contribution room. If you can’t max it out in a year, you can always catch up in the following years.
Also, qualifying TFSA withdrawals are not included in (c) above. For example, transferring your TFSA from one financial institution to another will not affect your contribution room.
How to get your TFSA contribution room
There are a number of TFSA contribution room calculators you can use online.
In general, you’ll be prompted to enter the year you turned 18 and how much you’ve contributed to date. Your TFSA contribution room is then displayed.
The results will not always be correct for a few reasons. For example,
- You were not a resident of Canada for some years; or
- You did not enter the right amount you’ve contributed to your TFSA to date
An easier and quicker way to get your TFSA contribution room, or TFSA contribution limit, is by checking with CRA using one of the following options:
- CRA My Account
- MyCRA Mobile App
- Using the Tax Information Phone Service (TIPS) by calling 1-800-267-6999
All TFSA issuers are required to submit a record of all your TFSA transactions to CRA by the last day of February. CRA will then use the information to calculate what your TFSA contribution room for the current year will be.
Penalty for TFSA over-contribution
The penalty for over-contributing to your TFSA is 1% tax on the highest excess amount for each month the over-contribution remains.
Here is an illustration:
Let’s assume you start 2020 with a TFSA contribution room of $10,000. And in March and June, you made 2 contributions of $5,000 each.
Any additional contribution you make in 2020 will result in an over-contribution and attract the 1% penalty.
For example, if you made another contribution of $5,000 in September, a penalty of $50 will be due each month until you either:
- withdraw the excess TFSA contribution; or
- the excess amount is eliminated by new contribution room in the following year.
Note that the penalty is calculated on the highest excess amount for each month. So if you withdraw the $5,000 excess amount within the same month, you will eliminate the over-contribution and avoid penalties for the subsequent months.
But the penalty for September will still hold and be computed on the full $5,000.
As you can see, the penalty for over-contributing to your TFSA is more punitive compared to RRSP.
Unlike RRSP that lets you over-contribute up to a buffer of $2,000, the penalty for TFSA over-contribution kicks in immediately. Even if you withdraw the excess amount the following day, you’ll still be on the hook.
And that is why you need to track your contributions using a TFSA contribution spreadsheet.
TFSA Contribution Tracker
You can download either the Microsoft Excel or Google Sheet version of the TFSA contribution tracker. They work in the same way.
To get started, you’ll need to get your TFSA contribution room as at January 1st of the current year. As mentioned earlier, logging into your account with CRA is the quickest way to get the information.
Once you have the amount, you can start tracking your contributions for the current year.
Simply enter your TFSA transactions, both contributions and withdrawals, and the tracker will automatically calculate your available unused TFSA contribution room for the current year.
A quick note:
Dividends, capital gains, proceeds from sales or moving your TFSA from one provider to another (if done properly) will not affect your TFSA contribution room. That means, you should not include them in the spreadsheet for tracking your available or unused room.
As a bonus, the TFSA contribution tracker will also show you how much you’re contributing per month and year to date compared to your plan. Just enter your planned contribution amount in the space provided.
Go ahead and grab the spreadsheet – no email required. But feel free to subscribe, let’s be friends. 🙂
Download the TFSA Contribution Tracker
TFSA Penalty Calculator
So you’ve over-contributed to your TFSA, what next?
You need to take immediate steps to correct the over-contribution. But you should also be ready to pay the penalty even if you withdrew the excess amount within the same month.
The TFSA penalty calculator included in the spreadsheet will help you calculate the penalty due to CRA.
Once you enter the details of all your TFSA transactions, the calculator will compute the highest excess amount for each month, if any, and display the penalty you may have to pay.
Your TFSA contribution room is the sum of the current year’s TFSA dollar limit ($6,000 for 2021), any unused contribution room at the end of the preceding year and withdrawals in the previous years.
The easiest and quickest way to get the information about your TFSA contribution room is through your account with CRA.
The penalty for exceeding your TFSA contribution room is a 1% tax on the excess contribution, payable each month that the excess amount remains.
No, unlike RRSP you won’t lose your TFSA contribution room when you make withdrawals. You can re-contribute any amount withdrawn by the following year.
Hope you find the TFSA contribution tracker useful. Feel free to adapt the spreadsheets to meet your specific needs.
And if you’ve over-contributed to your account, you can use the TFSA penalty calculator to estimate how much tax you may to pay to the CRA.
To learn more about TFSAs, check this TFSA FAQs post.
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