“I haven’t had a single question from a client” about TFSA contribution room, said Aaron Hector, senior wealth advisor and founding partner with TIER Wealth in Calgary. He also discusses TFSAs with clients early in the year.
Hector’s firm provides tax services and so typically has CRA account access for clients, but that’s no advantage this year. The CRA began using a new data validation process for the electronic filing system used by institutions to upload tax information slips, and on April 3, the CRA said some issuers had trouble uploading the slips, which made for a challenging tax season. The trouble extends to TFSA annual information slips.
As explained on the CRA’s website, TFSA contribution room is the total of the TFSA dollar limit of the current year ($7,000 in 2025), any unused TFSA contribution room from previous years and any TFSA withdrawals made in the previous year.
The CRA’s self-service My Account portal is updated each Jan. 1 to reflect the new annual TFSA dollar limit, and is updated again with adjustments to TFSA contribution room once financial institutions’ annual TFSA information slips — due the last day of February — have been processed by the CRA.
In an email on Friday, CRA spokesperson Sylvie Branch wrote that issuers of information slips “had to get accustomed to the new system, adapt to new processes and, most importantly, contend with stricter validation of the data they submit to the CRA. These stricter validations and new processes caused delays in receiving and processing the information returns this year,” including TFSA annual information returns.
“Resolving our system issues is our priority, so that we can update TFSA information in My Account as soon as possible,” Branch wrote.
The CRA had no date for when the update would occur. “We regret the inconvenience and thank taxpayers for their patience,” the email said.
If a taxpayer doesn’t correctly calculate their TFSA contribution room, they could mistakenly overcontribute. Penalties for overcontributions are 1% per month on the excess amount, and many months could pass before a taxpayer becomes aware of an overcontribution.
“It is each taxpayer’s responsibility to maintain their own records and to compare them against their financial institution’s records as well as the information on My Account,” Branch’s email said. (The CRA has a worksheet to help calculate TFSA contribution room.)
With longstanding clients, calculating TFSA contribution room is “relatively easy” by consulting a multi-year transaction log, Hector said, assuming the client has no other TFSAs with other financial institutions.
Markus Muhs, senior portfolio manager with Muhs Wealth Partners and CG Wealth Management in Edmonton, said he’s received a few client inquiries this year about TFSA contribution room. “I bet there’s a lot of people with self-directed TFSAs [and] no adviser to stop them” from overcontributing, he said. “If they didn’t look a little bit deeper [to track their TFSA contribution room], they probably put themselves in a bad position.”
Even in a typical year, “the information on CRA’s website is never accurate in the first two or three months of the year,” given financial institutions have until the end of February to report the information, Hector said. Further, in past years, “we’ve had instances where we’ve had to go back to the financial institution” because it hadn’t provided information to the CRA.
“I’ve generally told [clients] you can’t trust that number,” Muhs said, referring to TFSA contribution room shown in My Account. “You have to keep track of it yourself.” He also tells clients to review TFSA transactions in My Account, not just the initial contribution limit shown, as a way to ascertain if the information is current (in a typical year when My Account has TFSA information).
In an email, Wilmot George, managing director of tax and estate planning with Canada Life in Toronto, said, “The CRA might not receive TFSA transaction records for the prior year until the end of February each year, which can result in inaccurate contribution limits from the CRA for the first couple months of the year.” Further, “reporting mistakes by financial institutions and the CRA might occur from time to time, so taxpayers should have some idea of how to calculate their contribution limits (or at least recognize errors) to avoid excess contributions and related penalties.”
While tracking TFSA contribution room is ultimately the responsibility of the taxpayer, “many are still learning about the TFSA and how it works, and most are not trained in calculating TFSA contribution room, especially when withdrawals have occurred,” George wrote.
Helping clients keep track of TFSA contribution room is table stakes for advisors and should be part of reviews with clients, Muhs said.
The clients who most need help tracking contribution room tend to be in a middle category, Sithamparapillai said — in between the high-net-worth clients who max out their TFSAs at the beginning of each year and the young families with expenses, who may be focused on RRSP savings. The client in the middle category may receive an inheritance, bonus, company shares or promotion, and want to make a one-time contribution or establish a more aggressive contribution schedule. “That’s the area where the really nuanced calculations or tracking comes into play,” Sithamparapillai said.
As he does with clients’ activity in other registered accounts such as RESPs, registered disability savings plans (RDSPs) and first home savings accounts (FHSAs), Sithamparapillai has started keeping a tally and personalized notes about clients’ TFSA contribution room, including contributions and withdrawals. (CRA portals don’t include information about contributions to RESPs and RDSPs, he noted.) That way, whenever clients have money to make a contribution — they receive a lump-sum payment, say — Sithamparapillai has the numbers at hand.
The process is efficient for client discussions, he said, and “clients find it valuable to have that information at a moment’s notice.”
Managing registered accounts
In preparation for client meetings at the beginning of the year — and discussions about registered accounts — Sithamparapillai collects clients’ year-end paystubs, which informs him of clients’ income and pension or group RRSP contributions (including employer contributions). Combined with other information such as previous notices of assessment, “I can get a pretty good proxy … of what their effective marginal tax rate is,” he said. Benefits, such as the Canada Child Benefit, are also considered.
Hector says he asks clients whether they plan to have children (or more children). “The piece … a lot of people miss in that [TFSA vs. RRSP] conversation is the family plan,” he said. “You might be in a middle tax bracket, but when you add on the Canada Child Benefit … you’re probably pushing up into a top marginal tax bracket or approaching it.”
Based on the client’s effective marginal tax rate, Sithamparapillai explains to clients (and, potentially, to their accountant or bookkeeper, he said) whether a TFSA or RRSP contribution makes more sense. Clients’ projected tax bracket at retirement is also considered.
Part of the discussion is about where contributions will come from, which, in the case of an RRSP contribution could be from a TFSA. “If you’re pulling from your TFSA room, then we have some additional contribution room [that becomes] available,” he said, referring to TFSA contribution room for the year after the withdrawal, not the current year.
If a client is on the fence about the RRSP vs. TFSA decision, “I would usually err to using the [TFSA], because it’s just so flexible,” Hector said. “It’s really easy to take money out of a TFSA a year or two down the road and move it into the RRSP. Going the other direction just does not work.”
While each client’s situation is different, Muhs said, generally, clients take advantage of both TFSAs and RRSPs as their incomes grow.
Sithamparapillai typically suggests clients don’t open multiple TFSAs with multiple financial institutions, which complicates tracking contribution room.
Muhs too advises clients against having more than one TFSA. “You can do multiple things with one TFSA,” he said, including having an emergency fund, short-term savings and longer-term investments for retirement. “Some people don’t realize that.” Also, an advisor should ask a client if they have TFSAs that the advisor doesn’t know about, he said.
Muhs also suggested some TFSA holders would benefit from an overcontribution cushion, as with RRSPs. Generally, taxpayers must pay a tax of 1% per month on contributions that exceed their RRSP deduction limit by more than $2,000. Implementing such a measure for TFSAs would make them more user-friendly, he said.
As things stand, he tells clients who make sporadic TFSA withdrawals and contributions to consider leaving themselves a little bit of TFSA contribution room as a precaution against overcontribution.
“You don’t have to max it out fully,” Muhs said. “Give yourself a cushion, because we’ve got lots of [TFSA] contribution space now.”
The total contribution room available for someone who has never contributed to a TFSA and has been eligible to do so since its introduction in 2009 is $102,000.
Here are the TFSA dollar limits by year:
- 2024 – 2025: $7,000
- 2023: $6,500
- 2019 – 2022: $6,000
- 2016 – 2018: $5,500
- 2015: $10,000
- 2013 – 2014: $5,500
- 2009 – 2012: $5,000