2022 TFSA Limit, Contribution Room, and Over-Contribution Penalties

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by Enoch Omololu

Updated

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The 2022 New Year will offer another opportunity for you to utilize your Tax-Free Savings Account (TFSA) and protect your investment income from taxation.

If you’re 18 years old and a resident of Canada, you are eligible to start accumulating TFSA contribution room. You can choose to save or invest funds tax-free up to the maximum of your contribution room.

2022 TFSA Contribution Limit

For 2022, the annual TFSA limit remains at $6,000 (was also $6,000 in 2021).

If you have been eligible to contribute to the TFSA since its inception in 2009, it means that in 2021, you had a total contribution room of $75,500, and for 2022, your contribution room will increase to $81,500.

Essentially, you can invest up to $81,500 upfront in 2022 and not have to pay taxes on the income earned from your investment.

The table below shows the annual TFSA contribution limits since 2009:

YearContribution LimitCumulative Contribution Room
2009$5,000$5,000
2010$5,000$10,000
2011$5,000$15,000
2012$5,000$20,000
2013$5,500$25,500
2014$5,500$31,000
2015$10,000$41,000
2016$5,500$46,500
2017$5,500$52,000
2018$5,500$57,500
2019$6,000$63,500
2020$6,000$69,500
2021$6,000$75,500
2022$6,000$81,500

Related: TFSA Over-Contribution Penalties

How the TFSA Annual Limit is Calculated

The TFSA annual dollar limit is calculated by indexing it to inflation and rounding it off to the nearest $500. The government determines the indexation factor for each year from the percentage change in the average Consumer Price Index (CPI) over the previous year.

For example, to compute the limit for 2009, we multiply $5,000 by the indexation factor of 0.6% (1.006) in use that year: $5,000 x 1.006 = $5,030. This result was then rounded off to $5,000.

For the 2019 TFSA limit, the indexation factor is 2.2%. As such, when we calculate the indexed TFSA limit for 2019 (i.e. $5,721 x 2.2%), we have $5,847 which is rounded off to $6,000.

For the 2020 TFSA limit, the indexation factor is 1.90%. When you compute the indexed TFSA limit for 2020 (i.e. $5,847 x 1.9%), you get $5,958 which explains why the TFSA annual limit remains at $6,000.

For the 2021 TFSA limit, the indexation factor is 1.0%. As such, when we calculate the indexed TFSA limit for 2021 (i.e. $5,958 x 1.0%), we have $6,017.58 which is rounded down to $6,000.

For the 2022 TFSA limit, the indexation factor is 2.4%. When you calculate the indexed TFSA limit for 2022 (i.e. $6,017.58 x 2.4%), you get $6,162 which is then rounded down to $6,000.

YearTFSA Indexation FactorIndexed TFSA Limit
20090.60%$5,030
20101.40%$5,100
20112.80%$5,243
20122.00%$5,348
20130.90%$5,396
20141.70%$5,488
2015*1.30%$5,559
20161.40%$5,637
20171.50%$5,721
20182.20%$5,847
20191.90%$5,958
20201.00%$6,017
20212.40%$6,162

*Inflation-adjustment was cancelled for 2015 and the annual limit was pegged at $10,000.

From the table above, it’s obvious that persistently low inflation means that the TFSA limit will not increase for a while. 

2022 TFSA Unused Contribution Room

If you’ve not been contributing the maximum limit every year, it will accumulate and you’ll have ‘unused’ TFSA contribution room. Unused contribution room can be carried forward indefinitely.

Also, if you choose to withdraw funds from your TFSA in any particular year, the amount withdrawn can be re-contributed in the following year.

To calculate your total contribution for 2022:

  • TFSA limit for 2022 ($6,000), plus
  • Unused contribution room for 2021, plus
  • Withdrawals made in 2021.

TFSA Contribution Room Example

Let’s say Jane became eligible for TFSA’s in 2020, however, she was unable to make any contributions until the following year in January 2021, when she contributed $8,000. In September 2021, she withdrew $3,000 from her TFSA for an emergency. What is her total contribution room for 2022?

Answer:

  • contribution limit for 2020 = $6,000
  • + contribution limit for 2021 = $6,000
  • contribution made in 2021 = $8,000
  • + withdrawal made in 2021 = $3,000
  • + contribution limit for 2022 = $6,000
  • Total TFSA Room for 2022 = $13,000

For 2022, Jane has a total contribution room of $13,000.

If you’re confused about what your unused TFSA contribution room is, you can also find it on your Notice of Assessment or via My CRA Account.

TFSA Annual Limit, Contribution Room, and Penalties for 2018

TFSA Investment Options

A variety of investments can be held in a TFSA account including stocks, mutual funds, ETFs, GICs, bonds, cash, etc. You can learn more about your options in the resources listed below:

If you prefer a hands-off approach for investing your TFSA funds and at a much lower fee than the average mutual fund, take a look at Canada’s Robo-Advisors. Robo-advisors use low-cost ETFs to build your portfolio and charge a small management fee.

Our top pick for robo-advisor in Canada is Wealthsimple. You get a $75 cash bonus when you sign-up using this link.

Related Posts:

TFSA Penalties

There are penalties for running afoul of CRA rules relating to your account. Some non-compliances that result in penalties include:

  • Over-contributing to your TFSA
  • Investing in non-qualified or prohibited investments inside your TFSA
  • Contributing to a TFSA while you’re deemed a non-resident of Canada

The most common offense is when people over-contribute to their TFSA either deliberately or because they’ve misunderstood the withdrawal and re-contribution rules.

Over-contribution results in “Excess” TFSA contribution which is levied a 1% penalty tax per calendar month, until it’s removed.

2022 TFSA Limit, Contribution Room, and Over-Contribution Penalties

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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

10 thoughts on “2022 TFSA Limit, Contribution Room, and Over-Contribution Penalties”

  1. @Steve. Exactly- And your points on how TFSA’s can be beneficial to prevent OAS clawbacks and minimize taxes in retirement are spot on!

  2. Hi Enoch!

    This was a fun read. You did a great job at explaining the TFSA!

    I love love love the TFSA! It’s one of the best saving and investing tools that Canadians can take advantage of.

    The only thing is that it’s too flexible and I know my friends who would just treat it like a checking account — just take the money out to spend on random things but never put it back (even though they swear that they would) haha!

    Otherwise it’s awesome for those who are disciplined. ?

    • @Finsavvy – Yes, the TFSA is very flexible and that definitely has its pros and cons. Thanks for stopping by!

  3. Thanks for sharing this info. it’s really nice.

  4. Hmmm, not that I’m a space cadet or anything but I have no idea how much I’ve contrib used over the years… is there any way to find out?

  5. Is the government considering a lifetime limit for contributions or will the present 2020 limit increase yearly by inflation?

    • @Iverson: As far as we know, the TFSA annual limit will continue to increase with inflation…rounded off to the nearest $500. This may change in the future though when we start having a ton of people with $1 million dollar TFSA accounts!

  6. Thank you for this information. What is the maximum amount allowable within the TSFA based on investment gains?

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