The Canadian government allows Canadians to save money throughout their life into the tax-free Savings accounts (TFSA). The citizens can contribute and grow tax-free investments. The CRA reviews the annual contribution limit based on inflation and CPI changes.
The contribution limit is essential to know to avoid over-contribution and other penalties. With the new year, Canadians with TFSA accounts or people who wish to open an account should check the contribution limit to comply with TFSA rules.
2025 TFSA Contribution Limit
The Canadian government introduced the TFSA program in 2009 to allow individuals to set aside some money for future emergencies throughout their lifetime. People who meet the eligibility conditions can open the account and contribute to it.
The participants of TFSA should know the regularly adjusted contribution limit of the year to avoid over-contributions and maintain a stable investment in the account. According to the CRA, the TFSA contribution limit for 2025 has not changed; it is the same as the 2024 limit, that is, $7000.
The $7000 contribution limit for a TFSA account is the second-highest limit after the 2015 year $10,000 limit. The CRA has increased the contribution limit by $500 from 2019, however, the current scenario sets the limit the same as 2024.
Canadians should be aware that the TFSA contribution room determines the annual maximum contribution they are permitted to make to their TFSA account, hence they should review it annually.
How to compute the TFSA contribution room?
The TFSA account holder cannot contribute over their contribution room, which depends on the TFSA dollar limit of the year, unused TFSA contribution of the previous years, and any withdrawals you made last year from the TFSA account.
The TFSA account holder must know their contribution room as it grows each year even when you don’t file the taxes or open a TFSA. The contribution room begins to accumulate after you turn 18, it is not affected by your earned TFSA investment income or the TFSA investments changes.
For instance, your contribution room was $6500 in 2024, and you contributed $1000 in 2024, so the unused contribution room at the end of the year will be $5050, now the let say you have done some withdrawal (say $3000) and the TFSA contribution limit is $7000, hence the TFSA contribution room in the beginning of 2025 will be $5500 + $3000 + $7000 = $15500.
Where to track the TFSA contribution Room?
If you wish to check your TFSA contribution room information you can use the following services and get the contribution room information for the year:
- You can contact the Tax Information Phone Services at 1 800 267 6999;
- You can log into the My Account for Individuals and check your TFSA contribution room information;
- If you are an authorized representative who is representing a client, you can Sign in to Represent a Client with your user ID or password to check the info.
- You can find the information on the MyCRA mobile applications easily.
You can find the 2024 contribution, unused contribution, withdrawals and other info to determine your TFSA contribution room at the start of the year.
Who can open the TFSA account?
According to the TFSA guidelines, Canadians who meet the following eligibility conditions can open a TFSA account:
- You must be a Canadian resident and you must have a valid Social Insurance Number (SIN);
- You must have attained the age of 18 years or older to open the TFSA account;
- The non-residents can also take advantage of the TFSA account when they have valid SIN and meet the age factor, however, their monthly contribution will be subjected to a 1% tax.
How much can you save with a TFSA account?
According to the TFSA guidelines, the contributions you make into the account are non-deductible for tax purposes, and the investment income you made or the withdrawals are tax-free.
Hence, the money you invested into the TFSA and your savings will grow only. The saving rate for every participant may differ based on the investment income, the product they bought, and the type of investment they made. The participants can check the TFSA account through their My Account or through the CRA mobile app.
The CRA offers three types of TFSAs – annuity contract, deposit, and arrangement in trust for the participants. The participants can use the TFSA fund for anything, like buying a new car, house, children’s education, etc.
What’s the consequence if you contribute over the limit to your TFSA account?
The TFSA contribution limit ensures that people do not contribute more in a year to save more for the future and make their financial decisions wisely. The contribution limit also maintains the steady flow of contributions, so if the participants have overpaid into a TFSA account, they have to face the consequences.
According to the TFSA rules, Canadians who make an annual contribution over the limit will have to pay taxes for every dollar that goes above the limit at a rate of 1% tax. The 1% tax will apply to the excess amount of each month you contributed or until more contribution room becomes available,
If the participants continue to over contribute they will have to pay the penalty in the form of taxes or withdraw the excess amount. Hence, the agency advises the TFSA account holders to keep track of their contribution room for the year.
The TFSA allows Canadians to save money for the future from the age of 18 and helps them build tax-free income that they can use for their dreams, emergencies, or anything else.