Investment · TFSA
TFSA withdrawal & re-contribution.
A TFSA withdrawal does not give you room back right away. Enter your room, the amount you took out and when you want to put it back to see whether you would be over the limit.
Withdrawn money is added back as room on January 1 of the next calendar year, not this year. Example: with $2,000 of room, you withdraw $5,000 and put $5,000 back in October. The excess is $3,000, taxed at 1% a month for 3 months: $90.00. Wait until January and the same deposit is covered by room.
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How withdrawals and room work
The CRA says a withdrawal “does not immediately create new available contribution room” and “will only be added back as available contribution room on January 1 of the next calendar year.” Re-contributing in the same year without enough room “is considered an over-contribution.” An excess is taxed at 1% for every month it stays in the account.
Worked example. Room now $2,000. Withdraw $5,000, then deposit $5,000 in October. Room this year covers $2,000 of it, so $3,000 is excess. The tax is $3,000 × 1% × 3 months (October, November, December) = $90.00. On January 1 the withdrawn $5,000 and the new annual limit ($7,000 here) are added back, giving $9,000 of room, enough to absorb the excess.
The months count assumes the excess stays until December 31 and is cleared by the January 1 restoration; the CRA assesses the tax itself, so your assessed amount can differ. The next-year limit you enter is an assumption. Related: TFSA over-contribution penalty.
Frequently asked questions
When do I get my TFSA room back after a withdrawal?
On January 1 of the next calendar year. The CRA says the amount is only added back as available contribution room then, along with that year’s new annual limit.
Can I put the money back in the same year?
Only up to the room you already have. If you re-contribute more than your available room, the CRA treats it as an over-contribution and taxes it at 1% per month while it remains.
Does the 1% tax end when January 1 arrives?
The tax applies for as long as the excess remains in the account. Once January 1 restores your room, the excess may be absorbed. Your actual assessment comes from the CRA, which can also waive tax if the error was reasonable and you corrected it.
What if I do not know my room?
Check CRA My Account and your institution’s records. The CRA warns that you should always verify your room with your institution’s records to avoid over-contributing. This tool takes the number you give it.
Sources
Checked
- CRA: Withdrawing from a TFSA
- CRA: If you over-contribute to a TFSA
- CRA: Calculate your TFSA contribution room
- CRA: If you have to pay tax on a TFSA (waiver of tax)
Runs entirely in your browser. Nothing you type is sent or stored. This is an independent guide, not the CRA; confirm your own room in CRA My Account or your institution's records.
Not advice
The CRA assesses the actual tax from its records, and the next-year limit is an assumption you enter. Illustration only, not tax advice.