Learn More About Your TFSA Contribution 2022

TFSA Limit 2022

TFSA Limit 2021

The Tax-Free Savings Account or TFSA has become a very popular investing tool for Canadians. The good news for Canadian families is that each adult can contribute another $6000 into their TFSA accounts this year. That is $6000 in total across all accounts. Indeed, you can have multiple accounts, but you are capped to a contribution max. 

TFSA limit calculator

The genesis of the TFSA program goes back to 2009. Adult Canadians must have a valid social insurance number and be over age 18 to open a TFSA.

If we look at each of the years, the program has been available and add up the total contribution room for each year, and you will see the full capacity that you may have available in your TFSA. Keep in mind, if you made a withdrawal in a year, it reduces your room for that year…but unlike the TFSA's frustrating and restrictive older cousin, the RRSP, you get this room back the following tax year on January 1st.

TFSA contribution room 2021

TFSA contribution limit 2022

As you can see above, the current room available for 2022 follows the last two years at $6000. Many Canadians have far more space than this open. However, Canadians are seemingly getting more distrustful of governments in general and have concerns about the future of tax-qualified plans like the TFSA and RRSP. Much of this has to do with fears of the “bail-in” legislation in Canada. Following the Crisis of failing banks in Cyprus in 2012-2013 and Greece in 2009-2010 following the Financial Crisis, many western nations moved from bailout to bail-in legislation. 

Famous bestselling Author R. Nelson Nash commented in his book Becoming Your Own Banker that tax-qualified plans provided by governments were akin to appointing the fox to guard the henhouse as he describes Willie Sutton's law. “Wherever wealth is accumulated, someone will try to steal it.” 

For this reason, Canadians are learning that the original “tax-free savings” has always been Participating Whole Life Insurance. It has been around as a stabilizing force in the financial lives of Canadian families for over 170 years. Unlike the restrictions of a TFSA account, there are no limits imposed on the government to how much you can put in or take out as a Par Owner with a private contract.

What is the lifetime limit for TFSA?

Using the chart on this article, you can see the cumulative total contribution room for the TFSA as of the 2022 calendar year is $75,500

When can I make my 2022 TFSA contribution?

Your TFSA contributions are available to be made as soon as you enter a new tax year. Unlike the RRSP, there is no hold over a time frame where you can backdate a contribution to the previous tax year. The RRSP is the only item in the Income Tax Act of Canada that seems to allow the suspicions ability to make a contribution in a new tax year and apply it to an old one.

TFSA Annual contribution room

How much can I contribute to a TFSA if I have never contributed?

It's simple. You can open a TFSA account just about anywhere! The problem isn't getting an account open but understanding what you can do with that account once you have it. Any Canadian with a TFSA can invest the money in a variety of options approved by the government of Canada. These can include GIC's, A basic savings account, mutual funds, Stocks, Private placements exempt market securities, and even private lending on arm's length first and second mortgages. Depending on what you intend to do, you will need to choose an account (bank, firm, brokerage, insurance company) that gives you access to the products and strategies you are looking to use. Many are unaware you can even choose segregated fund with Life Insurance Companies that have some guarantees attached to them to help protect against your downside risk.

What happens if you exceed your TFSA limit?

Bring on the taxman! If you overcontributed to a TFSA account, you would be taxed at 1% per month on the overcontributed amount. So if you went $5000 over your limit, there would be a $50 monthly penalty paid as tax to CRA. That mistake could cost you $600 for the year if you were unaware of it. Be careful and take some time to consider where else you may put money to work that has similar advantages to a TFSA but even more features and benefits. To learn more, make sure to access our case study and see how Canadians coast to coast are finding alternatives. 

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