What happens if i over contribute to my tfsa

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Denise Deveau Denise J. Manage Account Sign Out. Search Field. A couple of notes to keep in mind:. Written and published by IG Wealth Management as a general source of information only, with reliance on information published by the CRA, believed to be accurate as of the date of publishing.

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A TFSA works like any savings account. You set aside whatever amount of money you want up to a government-set maximum and you remove the money whenever you want, without penalty. The cash accrues interest while in the account. There is a tax on TFSA contributions , but there is no tax on any interest earned.

Unlike a registered savings account, funds are withdrawn tax-free as income tax is already paid on the money. TFSAs are a great savings tool with very few limitations. However, as we mentioned before, there is one important limitation: how much money you can put into the account in any given year. When you over-contribute to a TFSA, you pay a penalty.

So, understanding yearly TFSA limits is very important. Never invested in a TFSA before ? You can contribute up to that maximum year-over-year, and enjoy all of the benefits of your interest, dividends, and capital gains being protected from taxes. Many people contribute a set amount to their TFSA throughout the year. Keeping an eye on this amount can help prevent over-contributions from happening.