Personal Finance

Planning on maxing TFSA contribution in 2023.Is it safe to withdraw the interest earned Jan 1 this year from TFSA

  • Last Updated:
  • Jan 5th, 2023 3:26 pm
[OP]
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Jun 1, 2015
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Planning on maxing TFSA contribution in 2023. Is it safe to withdraw the couple hundred in interest earned Jan 1 from TF

This may be a silly question. I know that interest earned on TFSA accounts don't have a bearing on contribution room but just curious if withdrawing the interest earned in 2022 from my TFSA could impact my contribution room at all for 2023.

I have a TFSA account with Tangerine and earned some interest that Tangerine deposited into my TFSA account on Jan 1st.

I plan on utilizing all of my (and spouses TFSA) this year so wondering if I may be taking a risk by withdrawing the couple hundred in interest deposited by tangerine on Jan 1st for having the funds there in dec 2022

Not really needing the interest funds that are in there and if there is a risk of it impacting my contribtuion limit in 2023, I would just leave it in the TFSA account for now. If there are no implications for my scenario, i would prefer to withdraw and move the interest earned to another account
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2023 contribution room = 6500 + past unused contribution room + withdrawals in 2022

That's it that's all. Rest of your post is confusing.
[OP]
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Jun 1, 2015
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CanadianConsumerYEG wrote: 2023 contribution room = 6500 + past unused contribution room + withdrawals in 2022

That's it that's all. Rest of your post is confusing.
I moved all of the funds out of my TFSA accounts in the last week of decemeber to make things a bit simpler in terms of how much contribution room I would be starting with this year.

In other words, as of January 1st, the only $ in the TFSA was the couple hundred interest that tangerine deposited for the interest earned for keeping the funds there in december

Do I need to be concerned about withdrawing the couple hundred from my TFSA if I want to max out my allowable ($88,000) in TFSA later this year?
Sr. Member
Dec 13, 2010
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RigorMortis wrote: I moved all of the funds out of my TFSA accounts in the last week of decemeber to make things a bit simpler in terms of how much contribution room I would be starting with this year.

In other words, as of January 1st, the only $ in the TFSA was the couple hundred interest that tangerine deposited for the interest earned for keeping the funds there in december

Do I need to be concerned about withdrawing the couple hundred from my TFSA if I want to max out my allowable ($88,000) in TFSA later this year?
I'm not really understanding why you removed all of your funds, only to re-deposit them now?

In any case, if you did remove funds in December of 2022, then as of January 1st 2023, you would have contribution room of:

(funds removed in December) + ($6,500 new 2023 room) = total available contribution room.


Also, just making sure you realize a TFSA is just an account type, and can be invested in things like stocks, bonds, GICs, etc - does not just have to be a savings account.
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RigorMortis wrote: I moved all of the funds out of my TFSA accounts in the last week of decemeber to make things a bit simpler in terms of how much contribution room I would be starting with this year.

In other words, as of January 1st, the only $ in the TFSA was the couple hundred interest that tangerine deposited for the interest earned for keeping the funds there in december

Do I need to be concerned about withdrawing the couple hundred from my TFSA if I want to max out my allowable ($88,000) in TFSA later this year?
You're confused about how a TFSA works.

There is no need to withdrawing all of your money to make it "easier". If you've been investing for a long time, your max contribution room should be excess of $88 000.

TFSA contribution room in 2023 is comprised of 3 things only

1. The new year allowance (2023 is $6500)
2. Withdrawals in 2022
3. Unused past contribution room

How much did you withdrawal in Dec from your TFSA? That, plus $6500, plus unused past room, will be your total 2023 contribution room.

So if you maxed your TFSA and am an amazing investor, and managed to grow your investments into $500k, withdrew $500k in 2022 to buy a house, in 2023 you will have $500k + 6.5k contribution room.

Withdrawing the couple hundred interest from your TFSA now just means that couple hundred of room cannot be contributed back into your TFSA until 2024.

Check your CRA online account, that will be the best resource to find out exactly how much contribution room you have (should be fully updated in mid Feb for 2023).
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does it matter?
as I said I many times why people have all this confusion about TFSA. It is simple.
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.
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Edit for simplification.

This is all you need to understand to figure out your limit.
CanadianConsumerYEG wrote: 1. The new year allowance (2023 is $6500)
2. Withdrawals in 2022
3. Unused past contribution room
If you pulled everything in 2022:
1. The new year allowance: 2023 is $6500
2. Withdrawals in 2022: everything you pulled in Dec 2022
3. Unused past contribution room: had you previously maxed your TFSA or no? It sounds like you don't know what this amount is?


A simple example:
If your TFSA limit is $100 and you deposit your $100. Your TFSA is now maxed.
In the same year if you grow that amount to $200 and withdraw it, the next year you get the full $200 back as contribution room (number 2) (in addition to the next year's growth, number 1).


Complicated part:
If you don't know number 3, you will need to calculate it.

You need to calculate how many TFSA years you are eligible for (if you're younger and weren't old enough at the time it was created). If you were old enough, it was $88,000

Then calculate all the money you deposited and withdrew from the account. NOT how much money you earned inside the amount. This is where withdrawing everything in Dec 2022 didn't matter for you. If you deposited $80,000 to your TFSA over your lifetime. Your remaining contribution room is $8000. Simple!

If you deposited $80,000 to your TFSA over your lifetime, grew it to $100,000, and you withdrew that in Dec 2022; your remaining contribution room is still $8000.
The $100,000 you withdrew in Dec 2022, unlocks as contribution room again Jan 1, 2023.

It also works negatively.
If you deposited $80,000 to your TFSA over your lifetime, shrunk it to $50,000, and you withdrew that in Dec 2022; your remaining contribution room is still $8000.
The $50,000 you withdrew in Dec 2022, unlocks as contribution room again Jan 1, 2023. The $30,000 is lost as contribution room. You would need to grow it back within the TFSA.


That will give you what your actual limit is.
Newbie
Mar 18, 2008
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Why would you withdraw those funds if they are growing tax-free?
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Super_Chicken wrote: Edit for simplification.

This is all you need to understand to figure out your limit.


If you pulled everything in 2022:
1. The new year allowance: 2023 is $6500
2. Withdrawals in 2022: everything you pulled in Dec 2022
3. Unused past contribution room: had you previously maxed your TFSA or no? It sounds like you don't know what this amount is?


A simple example:
If your TFSA limit is $100 and you deposit your $100. Your TFSA is now maxed.
In the same year if you grow that amount to $200 and withdraw it, the next year you get the full $200 back as contribution room (number 2) (in addition to the next year's growth, number 1).


Complicated part:
If you don't know number 3, you will need to calculate it.

You need to calculate how many TFSA years you are eligible for (if you're younger and weren't old enough at the time it was created). If you were old enough, it was $88,000

Then calculate all the money you deposited and withdrew from the account. NOT how much money you earned inside the amount. This is where withdrawing everything in Dec 2022 didn't matter for you. If you deposited $80,000 to your TFSA over your lifetime. Your remaining contribution room is $8000. Simple!

If you deposited $80,000 to your TFSA over your lifetime, grew it to $100,000, and you withdrew that in Dec 2022; your remaining contribution room is still $8000.
The $100,000 you withdrew in Dec 2022, unlocks as contribution room again Jan 1, 2023.

It also works negatively.
If you deposited $80,000 to your TFSA over your lifetime, shrunk it to $50,000, and you withdrew that in Dec 2022; your remaining contribution room is still $8000.
The $50,000 you withdrew in Dec 2022, unlocks as contribution room again Jan 1, 2023. The $30,000 is lost as contribution room. You would need to grow it back within the TFSA.


That will give you what your actual limit is.
Don't even calculate. Ask the tax man aka CRA, find it online in your CRA account.
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Dec 5, 2005
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CanadianConsumerYEG wrote: Don't even calculate. Ask the tax man aka CRA, find it online in your CRA account.
It won't be updated with the CRA.
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Jul 15, 2009
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If you were an adult Canadian resident every year since the TFSA was introduced, your current contribution limit is:
$88,000 - (total that you've ever contributed to a TFSA) + (total that you've ever withdrawn from a TFSA in 2022 or earlier)
Withdrawals in 2023 don't count for the last part.
Anything that happened within the TFSA, such as earning interest, doesn't affect your contribution room. Only contributions and withdrawals do.

If you weren't an adult Canadian resident every year since the TFSA was introduced, you need to reduce the $88,000 for the relevant years. See here for details: https://www.taxtips.ca/tfsa/tfsa-contri ... limits.htm
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Feb 8, 2014
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I get what your asking OP and it won't reduce your room, but you can't withdraw it today and re-contribute it tax free till next year unless you use some of your room to do so.
So it may be advantageous to leave it there or buy a Tangerine TFSA GIC or other TFSA investment with it or move it formally from Tangerine TFSA to TFSA at another bank so that extra room is not lost for 2023 though that can take 6-8 weeks and many banks charge you to do so.

I'd buy a TFSA GIC or investment with it inside Tangerine. 270 day GIC is not as good rates as 1 year but will mature before the end of 2023 and get you some extra interest on your interest.

I had something like $58 iirc in the same situation as yours, i just pulled it on the 2nd and plan to forget that room this year since i don't need it, but since you can utilize it consider my suggestion.
In fact in Rand McNally they wear hats on their feet and hamburgers eat people
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CanadianConsumerYEG wrote: Don't even calculate. Ask the tax man aka CRA, find it online in your CRA account.
Nope. CRA records are not updated till March 1st week may be. So you keep all the records. It is simple. I mean really.
Any contributions that are made or withdrawn from a TFSA in the prior year may not be reflected in your available current year contribution room until after the end of February. All issuers have until the last day of February to electronically submit a TFSA record to the CRA for each individual who has a TFSA. Any transactions made in the current year will not be included.
https://www.canada.ca/en/revenue-agency ... tions.html
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.
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callernamet wrote: Nope. CRA records are not updated till March 1st week may be. So you keep all the records. It is simple. I mean really.


https://www.canada.ca/en/revenue-agency ... tions.html
If you're OP that doesn't even know how TFSA works, you can't expect him to go back to 2009 and calculate all his contributions and withdrawals to find out his exact room, with records that probably are long gone.

Thus, wait until March 1 and the CRA will tell you exactly how much 2023 contribution room you have down to the penny.
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You won't get TFSA withdrawl amounts back as contribution room until the following year.
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CanadianConsumerYEG wrote: If you're OP that doesn't even know how TFSA works, you can't expect him to go back to 2009 and calculate all his contributions and withdrawals to find out his exact room, with records that probably are long gone.

Thus, wait until March 1 and the CRA will tell you exactly how much 2023 contribution room you have down to the penny.
wow. really?
So CRA wont update his contribution room in March/April 2022? Do not care about OP or anyone this is simple people. Tons of links/info with google. And I just read some dude did such mistake with contribution of 100K.
The news report says it was innocent mistake. CRA is punishing him/her. I think CRA might be correct to punish him. Sometime it is OK to punish being stupid. I will post it as soon as google find the answer. link.

OK here it is

What was 'simply an honest mistake' caused an overcontribution to the tune of $112,000

https://financialpost.com/personal-fina ... crosshairs
No matter what you choose to do with your TFSA funds, keep in mind that one of the biggest benefits of the TFSA, beyond the tax-free income and growth, is the flexibility to recontribute any withdrawn funds back to your TFSA, beginning the following calendar year. You’re also able to transfer funds from one TFSA to another, but it must be done via a direct transfer, rather than a withdrawal and recontribution.
Article content

Taxpayers who don’t appreciate the nuances of the TFSA recontribution or transfer rules, however, could find themselves in trouble with the taxman for overcontributing. That’s exactly what happened in a case decided in late 2022.

The taxpayer’s troubles began in early 2020, when, needing to move closer to his young daughter after separating from his wife, the taxpayer withdrew $50,000 from his TFSA with the intention of making an offer on a new home. He said he did this before actually finding a home because “in a hot housing market in which there were often bidding wars for the same home, a competitive bid necessitated that funds be in hand for an offer to be accepted within a very short period of time.”
The taxpayer quickly realized the housing market was simply “too hot for his financial wherewithal,” so he did what he assumed was “the reasonable thing to do” and deposited the same funds back into his TFSA on Feb. 6, 2020. Unfortunately, the taxpayer’s TFSA contribution room for the 2020 taxation year was only $10,000, such that the redeposit of $50,000 triggered an overcontribution for the month of February of about $40,000.
And this is killer
But things became even more complicated later that month when the taxpayer, in an attempt to consolidate two TFSAs into one account, transferred that same $50,000 from the TFSA into his regular savings account and then into a second TFSA on the same day.
OP and others should read this.
The taxpayer wrote to the CRA to request it cancel the assessment, arguing that “he was not aware that redepositing the same funds that were withdrawn during the same taxation year would constitute additional contributions.
Paleeese honourabl Fed judge its my mistake do not penalize me. I have done this mistake it once before
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.

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