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Hello Everyone,

I heard that someone who never invested in a TFSA is not constrained by the usual yearly limit and that he/she could open a TFSA and invest something like $50000 or a little more.

I am trying to see if that opportunity is applicable in my case. I have been a permanent resident of Canada for 2 years and do not have any TFSA at the moment. In past, I lived in Canada for many years as a foreign student.

Am I eligible for the ~$50K investment limit or just for the carried-over amounts of last 2 years?

Any wise advice would be appreciated. Thanks.
 

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... I heard that someone who never invested in a TFSA is not constrained by the usual yearly limit and that he/she could open a TFSA and invest something like $50000 or a little more.
The annual TFSA contribution amount is just one factor in the formula that determines the final TFSA contribution room (i.e. the constriction on the total one can contribute). This will also change as one makes contributions/withdrawals so I like to keep a running total so I know the exact number, as I make changes. One can wait for CRA to have the numbers reported to them ... but depending on the timing of some actions, their number may not be accurate.

Available TFSA contribution room = Current Annual TFSA contribution room that one meets the requirements for + unused TFSA contribution room were one met the requirements in the year it was granted + last year's TFSA withdrawals - contributions as they are made.

What matters is what is available to you, based on the years of eligibility and your actions. The "never used a TFSA = $50K+ available TFSA contribution room" has assumptions built in that if they don't hold true, one could have less TFSA contribution room than the $50K+ number. If the assumptions are true - that it is likely accurate.


Take someone who turned 18 in 2008. If they met all the requirements for the years 2009 to 2017 to be granted the annual TFSA room where no TFSA contributions were made - then the annual limits are added up (i.e. carried forward when not used) to get the total available TFSA contribution room.

For 2009 through 2012, that's $5K (adding up to $20K), 2013 - 2014 is at $5.5K (adding up to $11k), 2015 is $10K (adds in $10K) and 2016-2017 is $5.5K (adding up to $11K). That works out to $52K.

Take that same person but where them only qualify for the 2009 and 2017 annual allotments - then that's 2009 ($5K) and 2017 ($5.5K) to total $11.5K.


... I am trying to see if that opportunity is applicable in my case. I have been a permanent resident of Canada for 2 years and do not have any TFSA at the moment. In past, I lived in Canada for many years as a foreign student.

Am I eligible for the ~$50K investment limit or just for the carried-over amounts of last 2 years?
There does not seem to be enough information to be sure.

The first question is what calendar year you turned 18 ... if it was say 2014, then no matter what - the maximum annual TFSA contribution you would qualify for is 2014 through 2017. It may be fewer years based on what years the residency requirement.

The next key question is whether the foreign student years, you were considered a non-resident for income tax purposes. If so, those years also do not qualify for granting the annual TFSA contribution amount. This would mean less TFSA contribution room is available to you.

The TFSA rules say:
Non-residents of Canada
If you become a non-resident of Canada, or are considered to be a non-resident for income tax purposes:... no TFSA contribution room will accrue for any year throughout which you are a non-resident of Canada
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/who-open-a-tfsa.html#nnrsdnt
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html

I would think that the two years of PR means you qualified for at least the last two years of TFSA contribution room (i.e. $11K).
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html


As anderwf says - if you sign up for a CRA account then login, you can see your individual TFSA contribution room. It should include all the previous years that count.


Cheers


PS
Keep in mind that if you open multiple TFSA accounts, the TFSA contribution room has to be followed across all TFSA accounts (i.e. it is per person, not per account).

Also keep in mind that as a lot of people either want cash for an emergency fund or have the mistaken idea that a TFSA is a savings account - a lot of the bank offered ones will allow a savings account with a low rate or GIC. Where one wants to invest in stocks, bonds, MFs, ETFs etc., a TFSA account that allows this can be setup.
 

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^Going beyond just seeing what CRA says, it sounds like if you are resident but did not file taxes for a given year, they will not automatically grant you contribution room for those years. OP may need to go and file taxes for those years in order to gain the corresponding contribution room.
 

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This Canadian gov't link says an international student can be:
a) resident
b) non-resident
c) deemed resident
d) deemed non-resident

The residential ties figure out which one is.
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/international-students-studying-canada.html


I suspect the safest way to proceed is to get from CRA what they think your TFSA contribution room is then stay under that amount. You can follow up with confirming tax residency for the foreign student years as well as filing any missing tax returns that would may grant additional TFSA contribution room.

Or maybe you are lucky where the CRA has something in the $50K+ range already on file. :biggrin:


The penalty for TFSA over-contributions where the error is seen as a mistake is 1% per month until it is fixed. Some were using loopholes early in the TFSA program to get an advantage so if CRA figures the over-contribution is deliberate, instead of 1%, CRA can tax 100% of the gain.
http://www.taxtips.ca/tfsa/overcontributions.htm
http://tfsahelper.ca/for-foreigners/newcomers-to-canada/

Depending on the timing of when the over-contribution happens, CRA might not have the info to send you a letter about it until as much as a year or more after the fact so IMO, it is well worth your while to keep accurate records to make sure you don't go over the limit.


Cheers
 
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