Most people don’t realize how much TFSA contribution room they actually have, says Jamie Golombek, managing director of tax and estate planning for CIBC Private Wealth Management.

Though many Canadians know the annual contribution limit of TFSAs started off as $5,000 and that it’s now $5,500, he adds, few know what happens when they withdraw funds from their accounts.

Read: Evolving the TFSA to help seniors

“If a client’s never contributed to a TFSA, the total amount they can put in for 2014 is $31,000,” says Golombek, and the amount they’ll be able to put in for 2015 will be $36,500.

Read: Clients rank TFSAs over RRSPs

However, if a client already has a growing account and withdraws from it this year, her contribution for the following calendar year will then be calculated by using the amount of money she takes out, as well as by the annual added contribution limit.

“Let’s say that you’ve maxed out your TFSA [by] putting in $31,000 over the last 6 years,” says Golombek. If it’s grown to $40,000 and you withdraw the full amount this year, “that means that at the beginning of [next] year, your TFSA contribution room will have grown to $40,000,” plus the annual limit of $5,500.

So, in 2015, that person would be able to contribute $45,500 to her TFSA.

If a client’s TFSA drops in value, and she withdraws the full amount, her contribution room falls accordingly. A formula you can share with clients to figure out their contribution room for next year is:

Unused TFSA contribution room to date + Total withdrawal made in this year + next year’s TFSA dollar limit = TFSA contribution room at the beginning of next year


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