New TFSA contribution room
Every Canadian resident aged 18 or older has $7,000 of new TFSA room as of January 1, 2026. This has been the annual maximum for three consecutive years now, but it could possibly rise in 2027 to $7,500. The 2027 TFSA limit will be confirmed in late 2026.
Since 2016, the annual maximum has risen in $500 increments based on adjustments tied to the Consumer Price Index (CPI), which measures annual inflation.
Cumulative TFSA limit
Your cumulative TFSA limit is more important than the annual maximum. If you have missed contributions in the past, your TFSA room carries forward, with the yearly maximum added to your past room.
If you were 18 years of age or older in 2009 and a resident in Canada all of those years, your cumulative TFSA room would be $109,000 as of January 1, 2026. That is: if you were born in 1991 or earlier, have been a resident in Canada since 2009, and have never contributed to a TFSA, you could have $109,000 of TFSA contribution room in 2026.
2025 TFSA withdrawals
TFSA withdrawals impact your TFSA room. If you took withdrawals last year, those withdrawals will be added to your TFSA limit for 2026 along with the annual maximum.
For example, if you withdrew $10,000 from your TFSA in 2025, you would have the $7,000 annual maximum plus another $10,000 of TFSA room, for a total of $17,000 of new TFSA room on January 1, 2026.
Confirming TFSA room with CRA
You can confirm your TFSA room with the Canada Revenue Agency (CRA) by calling them or logging into your CRA My Account online. Note, however, that the data tends to be outdated.
TFSA contributions and withdrawals from the previous year are reported to CRA the following year, but may not be reflected until the spring or later. As a result, CRA’s TFSA records during the first half of the year may be inaccurate. This often leads to people inadvertently over-contributing to their TFSAs.
What to do if you overcontribute
If you contribute to your TFSA beyond your limit, you may be subject to penalties and interest. The penalties are 1% of the overcontribution each month. For example, a $10,000 overcontribution would have a $100 monthly penalty, or $1,200 for a full 12-month period. Interest is also applied to the penalties, and a penalty equal to 100% of any income or gains resulting from a deliberate overcontribution.
Non-residents of Canada cannot contribute to their TFSAs while living abroad. So, non-resident TFSA contributions will also attract penalties and interest.
The CRA may send you an education letter about your TFSA overcontribution and waive penalties and interest, but you should not count on it.
The bottom line: TFSA overcontributions can be very costly, so try to avoid and correct them as soon as possible.
Compare the best TFSA rates in Canada
If you do over-contribute, you should file a TFSA Return (Form RC243) by June 30 of the next calendar year. The CRA may show leniency by waiving or canceling all or part of the penalty tax. There are three conditions they will consider:
- If the tax arose because of a reasonable error.
- The extent to which the transaction(s) that lead to the tax also lead to another tax under the Income Tax Act.
- The extent to which withdrawals have been made from the TFSA to correct the error.
If you disagree with a TFSA Notice of Assessment, you have 90 days to submit a Notice of Objection – Income Tax Act (Form T400A). This is a way to formally disagree with CRA’s assessment and request a second review.
What to do if… you have RRSP room
If you have a high taxable income and RRSP contribution room, you may want to consider an RRSP contribution. You can withdraw money from your TFSA and use it to make an RRSP contribution.
The most beneficial situation to consider this is if your income is relatively high now, and you expect it to be relatively low in retirement. Especially if you can commit the money to invest for the long-term.
Jason Heath, CFP
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