Making or replacing withdrawals from a TFSA

A qualifying transfer from one TFSA to another is not considered to be a withdrawal. For more information, see Transfers.

Making withdrawals

Depending on the type of investment held in your TFSA, you can withdraw any amount from the TFSA at any time. Withdrawing funds from your TFSA does not reduce the total amount of contributions you have already made for the year.

Withdrawals, excluding qualifying transfers and specified distributions, made from your TFSA in the year will only be added back to your TFSA contribution room at the beginning of the following year. See example 2 below. 

Replacing withdrawals

If you decide to replace or re-contribute all or a portion of your withdrawals into your TFSA in the same year, you can only do so if you have available TFSA contribution room. If you re-contribute but do not have contribution room, you will have over-contributed to your TFSA in the year. You will be subject to a tax equal to 1% of the highest excess TFSA amount in the month, for each month you are in an excess contribution position. See example 1 below.

For information on withdrawing amounts from your TFSA, contact your TFSA issuer.

Example 1

Since opening her TFSA in 2009, Jenny has contributed the maximum TFSA dollar limit of $5,000 in each year. By the end of 2012, she has accumulated a total of $20,000 in her TFSA account. In 2013, the TFSA dollar limit is increased to $5,500 so Jenny makes a $5,500 contribution. Later that year, she withdraws $3,000 for a trip. Unfortunately, her plans change and she cannot go. Since Jenny already contributed the maximum to her TFSA earlier in the year, she has no TFSA contribution room left.

If Jenny wishes to re-contribute part or all of the $3,000 she withdrew, she will have to wait until the beginning of 2014 to do so. The $3,000 will be added to her TFSA contribution room at the beginning of 2014.

If she re-contributes any of the withdrawn amount before 2014, she will have an excess amount in her TFSA and will be charged a tax equal to 1% of the highest excess TFSA amount for each month that the excess remains in her account.

Example 2

In 2009 and 2010, Cedric is allowed to contribute $5,000 each year to his TFSA. In 2011, Cedric is allowed to contribute $5,000. He contributes $2,000 for that year. He calculates his unused TFSA contribution room as follows:

2011 TFSA dollar limit ($5,000) − 2011 contributions ($2,000) = unused TFSA contribution room available for future years ($3,000)

In 2012, Cedric does not contribute to his TFSA, but he makes a $1,000 withdrawal from his account. This withdrawal will not affect his TFSA contribution room for 2012. However, it will not be added back to his TFSA contribution room until 2013. He calculates how much unused 2012 TFSA contribution room he has available for future years:

2011 TFSA contribution room ($3,000) + 2012 TFSA dollar limit ($5,000) = 2012 unused TFSA contribution room available for future years ($8,000)

Given that Cedric's withdrawal will not be added to his TFSA contribution room until 2013, he calculates his TFSA contribution room at the beginning of 2013 as follows:

2012 unused TFSA contribution room ($8,000) + 2012 withdrawals (1 000 $) + 2013 TFSA dollar limit ($5,500) = TFSA contribution room at the beginning of 2013 ($14,500)

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