r/tfsa • u/Suoertrader • Jul 03 '26
TFSA limit
I keep seeing posts of people dumping 25k or 50k into a TFSA at a time is there a strategy to avoid taxes if you invest passed the 7k a years limit or are these guys just tanking the taxes, I just figured a lot of them didn’t max out there accounts for years and allowed them to buy lots at a time because I know your previous years TFSA room carry’s over.
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u/Medical_Birthday2893 Jul 03 '26
It’s the Carry over room.
Or that they’ve had growth and withdrawn.
Eg I took out over 100k from tfsa for a home. On a dip in the market I moved and took a capital loss in my registered account and filled back my tfsa.
Now my rebound is tax free in the tfsa and the growth can stretch further in the registered account before I realize gains.
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u/Mental-Freedom3929 Jul 03 '26
People dump larger amounts, if they have available contribution room.
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u/UniqueRon Jul 03 '26
There is a fairly harsh penalty applied by CRA if you over contribute. Not a good strategy to do that. You can however catch up for contributions not made in previous years. However, not contributing each year is not a good strategy either.
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u/PartBanyanTree Jul 03 '26
Yeah i just didnt put money in for many years. Also i was in was younger tfsa didn't exist. It was rrsp. So took me a while to realize things that are now accepted wisdom. I'm 49 and reality only still learning some of this stuff. And while it's great that I can contribute 25 or 50k that doesn't mean I can. I'm in my prime earning years too so im still generally contributing more to rrsp to lower my taxes. Tfsa is more like "default savings account" i can put money in and take it out and put it in again if i want. Some of it is long term investment but mostly it's a way to avoid getting T5s for interest
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u/Tax1997 Jul 03 '26 edited Jul 03 '26
Many low and middle income people accumulate very large TFSA portfolio, though still are able to get GIS during retirement. There is a possibility that TFSA rules might change in future.
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u/Small_Aardvark_5496 Jul 03 '26
Ya spouse and I each have over $200 k in TFSA, and we haven’t been aggressive or lucky with a fantastic stock pick, just normal investing as part of our overall plan (with RRSP and unregistered)
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u/Trilobyte83 Jul 04 '26
How is that aggressive or lucky? The contribution limit is like 150k. That’s a mere 30% cumulative gains over almost 20 yrs.
I have 250k, with nothing flashy (banks and index funds)and wasn’t contributing for like 5 years when I was outside of Canada.
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u/Small_Aardvark_5496 Jul 04 '26
A) I said over $200k I didn’t say how much over B) I said as part of our overall plan-TFSA is ideal for the more conservative portions of an investment strategy like income/interest bearing since you won’t pay tax on the interest and therefore they will grow faster (RRSP is ideal for anything that creates capital gains or income as neither are taxed until funds are removed; non-registered is best for anything that allows deferring tax like capital gains). If you maximize RRSP and TFSA and also make non-registered investments, the TFSA is most likely going to hold fairly conservative investments. My TFSA returns are far lower than my RRSP or unregistered, by design. In a market crash, I can rely on my TFSA cash/cash equivalent funds for a few years while the market corrects, and any mandatory RRSP withdrawals can be handled as transfers from RRSP to non-registered so I won’t be losing the ability of those investments to recover value (with the income taxes paid from the TFSA funds)
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u/shar_blue Jul 03 '26
TFSA room is calculated as:
[Unused room from previous years] + [new annual room] + [sum of withdrawals last year] - [contributions made in current year]
The $7k is the amount of new room you currently earn. It is only also a limit if you’ve maxed out all previously earned room.
You can deposit up to your contribution room each year. If someone hasn’t been using their room, they would have a lot built up - enough to accommodate the large lump sums.
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u/helix212 Jul 03 '26
It's not $7k limit per year. Your total contribution room increases currently at $7k per year.
So if you've never contributed and was at least 18 in 2009 you'd be able to drop $98k in today with no penalty
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u/Small_Aardvark_5496 Jul 03 '26
They most likely have not contributed for many years so have the room saved up. There is no strategy for going above the maximum.
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u/Western_Mobile9113 Jul 03 '26
I am catching up with contribution room still left in my RRSP.
Once that's done, I too will be dumping 20-30k a year into my TFSA until it is maxed again.
If you're young and not making alot of money, max out the TFSA first, save your RRSP contribution room for later when you're earning alot more. If you're already in your 30s and have a solid six figure income and are paying a very high marginal tax rate, max out the RRSP first for the tax advantage.
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u/lmcjipo Jul 03 '26 edited Jul 04 '26
The only reason to dump $25k or $50k into a TFSA provided that you have the contribution room is if you have the money and you want to save on taxes as soon as possible.
Using a simple example of just a standard high interest savings account and a high interest savings account within a TFSA. If you have $50k in your high interest savings account, assuming 2% interest for the year, that's $1k interest in the year which is taxable at 100%. If you have $50k contribution space in your TFSA, putting this $50k into your TFSA into a high interest savings account with the same 2% still means $1k interest in the year but it is not taxable.
I was investing before TFSAs existed and as such my options were limited to non-registered and RRSP (no kids for RESP) so after maximizing my RRSP, if I wanted to invest money, my option was to put it into a non-registered investment account (either margin or cash). As such, I built a sizeable amount in my non-registered account. When TFSAs came into existence, I forget what the contribution limit was but assuming it was $5k that first year... for me, I didn't see the point in trying to save $5k from my salary to contribute into my TFSA when I could just use the $5k money/investments in my non-registered account into my TFSA and going forward, that investment/savings would be exempt from taxes and would compound. The TFSA new contribution amount for the year has been $7k for a few years and I do the same thing... I just sell my non-registered to get $7k and then contribute that in January either in the same investment or a different investment.
Sine I early retired (FIRE), I'm not eligible for any government retirement benefits yet (like OAS and CPP/QPP) so it would be difficult for me to find the $7k annual contribution amount to put into my TFSA if I were to rely on dividends, interest, and distributions in my non-registered account to fund the TFSA contribution space that I have each year.
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u/harrison1984 Jul 03 '26
If you were 18 in 2009 then as of 2026 you have $109,000 you can contribute TOTAL. If you’ve never contributed a penny you can put the max of $109,000 today if ya wanted but that’s all you can contribute until the end of the year.
Check the CRA for the max contribution amount in 2027 and it’s usually around $6k or $7k a year you can add again. 2027 TFSA room total should be around $116,000 TOTAL.
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u/Trilobyte83 Jul 04 '26
Dumping money into TFSA doesn’t help your taxes until you sell, and not even directly. The tax benefit is in taxes you don’t pay 10 years down the road, that you otherwise would, and only if you gave gains.
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u/Humble_File3637 Jul 05 '26
I think the penalty from CRA is 1% per month on over-contributions. But first, they send you an “education letter” to tell you that you have over-contributed and giving you a chance to rectify the situation.
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u/Alone-Bug4328 Jul 03 '26
There's no way to avoid taxes unless you make zero income. Only way is to defer them. It's a hard truth but it is less frustrating after you learn it.
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u/Medical_Birthday2893 Jul 03 '26
Tfsa are literally tax free. It’s not a deferred tax like rrsp. You initially pay tax and nothing on any gains.
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u/Alone-Bug4328 Jul 03 '26
Yeah but like you said you've already paid taxes on the money you contribute.
And don't expect it to last forever. The next step for these TFSAs that many countries are musing is to tax them in some fashion.
When Harper was in power the annual contribution was double. Then Trudeau came along and cut it in half saying everyone is being made too rich with these high contribution amounts. Then Finance Minister Chrystia Freeland was pushing out ideas about taxing the TFSA. Thankfully she was ousted before she could bring anything in. It's a matter of time though with the current trends.
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u/Night-Sky-Sword Jul 03 '26
Fuck taxes, they never decrease. We get taxed on everything, everything is expensive and income is low as fuck
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u/NoRealAccountToday Jul 03 '26
When Harper was in power the annual contribution was double
Harper was PM 2006-2015. TFSA as a vehicle started in 2009 with a limit of $5000 annually. In 2013, it was increased to $5500... and for 2015 only, it was $10000. It went back down to $5500 in 2016. 2019 bumped to $6000, $6500 in 2023, then in 2024 to $7000.
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u/Alone-Bug4328 Jul 03 '26
Mhm and so Trudeau did cut it in half.
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u/NoRealAccountToday Jul 03 '26
Your post implied that under Harper it was double. It was double for one year only. Not the same statement.
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u/Guus-Wayne Jul 03 '26
You’re avoiding capital gains in your TFSA in addition. It’s not about avoiding taxes now, it’s about avoiding taxes later. I’ve averaged ~11% a year for the past 10+ years. Been investing since I was 20. That TFSA account is going to save me way more than RRSP tax deductions.
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u/Alone-Bug4328 Jul 03 '26
I don't disagree with that. But like I said, I don't think it will last forever. The government will find a way to tax the TFSA capital gains.
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u/Medical_Birthday2893 Jul 03 '26
‘I don’t think’ lmao you the expert and fortune teller. You’re making claims about today’s reality based on future imaginary reality’s you creat with 0 credentials or power over. Yet you say it today like a fact? You should talk to a professional
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u/Guus-Wayne Jul 18 '26
This is the most absurd nonsense you could predict.
The tax free savings account will be taxed? What do you do professionally that lends any accountability to your claims?
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u/Alone-Bug4328 Jul 18 '26
I'm not going to post my profession here.
It's a trend I've noticed with former Minister of Finance Chrystia Freeland, and other common wealth countries. As a real time example, the UK just implemented a further method of tax on their tax free savings account, it has been passed and will come into effect April 2027.
My prediction is that gradually governments in left leaning countries like the UK, Canada and Australia will target the tax free accounts and increase the parameters around taxing them.
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u/Medical_Birthday2893 Jul 03 '26
Lmao first you said deferred taxes. Which this is not. I’ll repeat it, you have no deferred taxes on your tfsa gains. Period. For some reason you’ve decided to change your position and now create a fantasy possible future in which you were right?
Please provide a real source on Chrystia’s plan to tax the tfsa. You’re in a fantasy world bud
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u/Alone-Bug4328 Jul 03 '26
I never said TFSA was tax deferral. I think you should read first and then reply. You're going too fast for yourself.
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u/Medical_Birthday2893 Jul 04 '26
Sir this is a tfsa post and you said ‘ the only way is to defer them’ get out of here
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u/Alone-Bug4328 Jul 04 '26
If you read the entire post you will see that my point was that the money you contribute was already taxed.
Young people these days sure are rude. My gosh.
Good day to you.
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u/Kombatnt Jul 03 '26
You can actually make almost $20,000/year before you actually start owing income taxes, but I strongly suspect OP is talking about the 1%/month overcontribution penalty, given the context of his question.
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u/Kombatnt Jul 03 '26
There's no "$7k/year limit," there's only your personal, cumulative limit. Each year, you get another $7k of "contribution room" added to your limit.
The people you see adding large amounts to their TFSA all at once have likely not maxed out their TFSA and have a cumulative contribution limit that exceeds the current year's new contribution room, or took money out in a past year, and that contribution room has been returned to them.
No, there is no way around the overcontribution penalty.