TFSA Over-Contributions
The amount deposited into a Tax Free Savings Account (TFSA) is subject to a yearly contribution limit.
Written by
Ryan Gubic
Published on
21
Apr 2025
Copy link
Executive Summary
The amount deposited into a Tax Free Savings Account (TFSA) is subject to a yearly contribution limit. For 2025, the annual limit has been set at $7,000. The lifetime maximum contribution has grown to $102,000.
If total contributions exceed your lifetime limit Canada Revenue Agency will levy penalties.
What You Need to Know
CRA will inform you when an over contribution on the account has been made and request an immediate withdrawal. Once you have made the correcting withdrawal, you must submit Form RC243(https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc243/rc243-19e.pdf) and its Schedule A (https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc243-sch-a/rc243-sch-a-17e.pdf) to calculate the penalty.
As a rule, CRA charges 1% per month on the excess contribution. The 1% penalty will be charged against the highest amount of excess during a month until the excess amount is withdrawn. The CRA does not pro-rate this penalty. If an over-contribution exists at any time during a calendar month, the CRA treats it as an entire month. If you correct your mistake on the first or second day of the month, you will be penalized the same 1% as you would if you corrected your error on the 31st.
To make the necessary withdrawal of funds, you will need to contact your financial institution or financial advisor and request the withdrawal be made.
Two common scenarios lead to most over-contribution errors:
· TFSA Management
o If you have multiple TFSA’s, especially when spread across several financial institutions, it can be difficult to correctly track all of your contributions. This becomes more difficult as time passes and the balances in each TFSA reflect its current market value, not the sum of its contributions.
· Withdrawal Management
o TFSA withdrawals are tax-free and, unlike RRSPs, your contribution room never goes away. However, the contribution room is not returned to you until the following calendar year begins. If you have contributed your maximum lifetime amount to your TFSA you must wait until the following January before contributing to your TFSA or incur the wrath and penalties of the CRA.
The Bottom Line
TFSAs are relatively simple but require some fundamental monitoring. Proper planning and working with the right financial advisor providing tax-saving advice can help avoid penalties.
Ryan Gubic is the founder of MRG Wealth Management Inc. operating as MRG Wealth (“MRG”) and is a Portfolio Manager with MRG investments of Aligned Capital Partners Inc. (“ACPI”). The opinions expressed are not necessarily those of MRG, ACPI, or Ryan Gubic. This material is provided for general information and the opinions expressed and information provided herein are subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on the information presented, seek professional financial advice based on your personal circumstances. ACPI is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through MRG Investments, an approved trade name of ACPI. Only investment-related products and services are offered through MRG Investments of ACPI and covered by the CIPF. Financial planning and insurance services are provided through MRG. MRG is an independent company separate and distinct from MRG Investments of ACPI. Contact your financial advisor in Calgary or your financial planner in Calgary to discuss.
Dollars and Sense
Discover more
Dive into some advice directly from our Founder and Personal CFO.
RRSP Basics 2025
