Making withdrawals

Depending on the type of agreement that you have for your TFSA, you can generally withdraw any amount from the TFSA at any time and for any reason, with no tax consequence. For information on withdrawing from your TFSA, contact your TFSA issuer. The withdrawals will also not affect your eligibility for federal income-tested benefits and credits. For further information see Impact on Income-tested Benefits.

Withdrawals, excluding qualifying transfers, made from your TFSA in the year will be added back to your TFSA contribution room at the beginning of the following year.

You cannot contribute more than your TFSA contribution room in a given year, even if you make withdrawals from the account during the year. If you do so, you will be subject to a tax of 1% of the highest amount in the month, for each month you are in an overcontribution position.

Example
In 2009, Sarah invests $5,000 in a TFSA. Later that year, she withdraws $3,000 for a trip to Europe. Unfortunately, her plans change and she cannot go. Since Sarah has no unused TFSA contribution room left, she will have to wait until the beginning of 2010 to deposit the $3,000 in her TFSA. If she does so earlier, she will have overcontributed to her TFSA and will be charged a monthly tax of 1% on the overcontributed amount.

You don't need to report any contributions or withdrawals you made during the year on your individual tax return.

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