If you owe tax on excess TFSA amounts
If you contribute more than your available Tax-free Savings Account (TFSA) contribution room allows, you will have to pay tax on the excess amount.
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How excess amounts are taxed
Any excess amount in your TFSA is taxable at a rate of 1% per month. This is calculated on the highest amount of excess in your account for each month it remains. If you over-contribute to your TFSA at any time in the year, withdraw the full amount of the excess as soon as possible to reduce the tax you owe.
An excess TFSA amount can happen if you do any of the following:
- Miscalculate your available room and contribute too much
- Re-contribute a withdrawal in the same year and do not have enough contribution room
- Contribute to multiple TFSAs without tracking your total contribution amount
Example: How removing the excess sooner can reduce your tax
If you over-contribute $2,000 in June and remove it in September of the same year, you will owe $20 per month for June, July, August and September (a total of $80). But if you remove the excess amount later in June, the same month of the over-contribution, the 1% tax still applies, but you would only owe $20.
Example: How removing the full amount of the excess can reduce your tax
If you over-contribute $6,000 in August and then withdraw $4,000 in mid-September, you will still owe $60 per month for both August and September (a total of $120). This is because the 1% tax applies to the highest amount of excess that is in the account in a month.
If you then withdraw the remaining excess amount of $2000 in October, you will owe $20 tax for that month.
Excess amounts that are a result of deliberate over-contribution may be taxed at the 100% advantage rate.
For more information: How an advantage is taxed
The CRA monitors TFSA contributions on an annual basis and will notify you if you have an excess amount. We typically notify you through your CRA account or by mail in late spring.
For more information:
If you are a non-resident
The tax on excess amounts can be combined with the tax on non-resident contributions.
If you exceed your available contribution room at a time when you are also a non-resident of Canada, the CRA can impose two separate 1% monthly taxes on your TFSA.
For more information: If you owe tax on non-resident contributions
How to report excess amounts
Submit your TFSA Return, any additional forms, and your payment to the CRA by June 30 of the calendar year after the year the tax applies. For example, if you owe tax on your TFSA in 2024, you must file by June 30, 2025.
Depending on the payment option you choose, you may submit your forms separately from your payment.
Remove the excess amount
Before you pay, withdraw the excess amount from your TFSA (if you have not already)
Complete the required TFSA tax forms
Send your TFSA tax forms to the CRA
Submit your forms using one of the following methods:
Online: Option 1
Use “Submit documents” in your CRA account to submit your forms online
By mail: Option 2
Mail your forms to one of the following:
Sudbury Tax Centre
TFSA Processing Unit
Canada Revenue Agency
Sudbury Tax Centre
Post Office Box 20000, Station A
Sudbury ON P3A 5C1Winnipeg Tax Centre
TFSA Processing Unit
Canada Revenue Agency
Winnipeg Tax Centre
Post Office Box 14000, Station Main
Winnipeg MB R3C 3M2If you send your forms by mail, you may include your payment.
Choose a payment method and submit the amount owing
To view TFSA payment methods, go to Payment options and provide the following answers:
- What type of payment are you making? Other benefit, tax, fee or amount owing
- Should you make the payment to the CRA? Yes
- Are you making the payment on behalf of: An individual
- What type of payment (or repayment) is being made? TFSA
You can access your filed TFSA forms online in your CRA account.