What Happens to Unused TFSA Contribution Room?
Dear Cheryl&Mack,
I just turned 24 and opened a TFSA to start saving for a down payment on a house.
I was told that my contribution room for this year was $6,500, but then was also told that since I’ve never contributed before, I could make up for lost time and utilize the unused contribution room.
So, now I’m confused. How can I contribute without being penalized? Where can I find the exact amount? Is this as stressful as it seems?
Best,
Newbie Saver
Dear Financial Contemplator,
Congratulations on taking the step to start saving for a down payment on a house at 24! It's such a smart financial move.
Regarding your TFSA contribution room, the limit for 2023 is $6,500, and if you were eligible in previous years (over the age of 18, which you are) but didn't contribute, you can now use that unused contribution room. So, you can contribute more than $6,500 this year alone.
If you want to know your exact TFSA contribution room, check your My Account on the Canada Revenue Agency (CRA) website or contact the CRA directly by phone or email. They will have the most up-to-date and accurate information tailored to your situation.
Contributing to your TFSA won't result in penalties if you stay within your contribution limit. However, if you over-contribute, you may face penalties of 1%; the CRA usually notifies individuals before imposing any penalties.
As a reminder, any investment gains within your TFSA are tax-free, which can significantly boost your savings over time.
Stay organized, keep track of your contributions, and make the most of your TFSA.
Happy Savings!