Author Topic: Canada TFSA previous contributions  (Read 5570 times)

nobodyspecial

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Canada TFSA previous contributions
« on: December 21, 2015, 09:50:51 AM »
My bank is being 'uncooperative' about transferring a TFSA to vanguard.
I can withdraw funds in one year and re-contribute them in the next, and since it is nearly the end of the year I planned to do this.
Can I only re-contribute what I originally invested (ie the previous annual limits) or the amount that is actually in the fund (including gains/losses) ?

morning owl

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Re: Canada TFSA previous contributions
« Reply #1 on: December 21, 2015, 10:27:16 AM »
Do you mean, you want to transfer to Vanguard, the brokerage? AFAIK we don't have Vanguard in Canada (as a brokerage) though you can invest in their funds through your bank in a self directed account... is that what you mean?

Gains and losses do not affect your contribution limit. If you withdraw the entire amount, your limit will not change. Next year it will be $46,500.

Heckler

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Re: Canada TFSA previous contributions
« Reply #2 on: December 21, 2015, 10:30:06 AM »
Since Canucks can't invest directly with Vanguard, I assume your talking about transferring your TFSA from one bank to another in a self directed discount brokerage to buy ETFs.

To do so, you need to fill in and submit the transfer forms to the company holding you new self directed account.  They in turn will submit it to your current bank and transfer the funds, either in cash (preferred) or in kind.  There should be no resistance, as you dont even need to deal with your current bank.

Dont withdraw the funds in cash, as you will lose your contribution room this year.

Talk to someone at your new self directed account company.

Heckler

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Re: Canada TFSA previous contributions
« Reply #3 on: December 21, 2015, 10:32:25 AM »
Transferring funds from one TFSA account to another will not affect your contribution room, as long as you fill in the transfer forms and have the banks take care of it.  Expect anout 4 weeks for the transfer to occur.

Stasher

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Re: Canada TFSA previous contributions
« Reply #4 on: December 21, 2015, 10:37:43 AM »
The easiest thing to do at your bank would be...
Open a self directed TFSA brokerage account through your existing bank
Wait until December (which is now) and withdraw your existing TFSA funds into you bank account
Transfer those TFSA funds into the new brokerage account in January (following calender year as per TFSA rules)

You are allowed to redeposit the same amount you withdraw but not into the next calendar year and you can add that years limit increase as well.

nobodyspecial

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Re: Canada TFSA previous contributions
« Reply #5 on: December 21, 2015, 12:21:25 PM »
Yes the TFSA will be held in Vanguard ETFs through Questrade.
But my bank charges a fee to transfer a TFSA and wants me to call their brokerage and they will take weeks to do anything
And yes, if I sell now I lose this years contribution room - but i can put it all back in on the 1st Jan.

My question was simply can I re-contribute only the years contribution limit that I originally  put into the bank TFSA or the actual amount held?

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morning owl

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Re: Canada TFSA previous contributions
« Reply #7 on: December 21, 2015, 12:51:43 PM »
An easy way to keep track of your TFSA is to keep an excel spreadsheet of all your contributions and withdrawals. Then you'll know exactly how much room you have.

Gains and losses don't affect contribution room. So if you deposit $5500 and it grows to $6000, when you withdraw the $6000 your limit is still $5500 (plus previous years limits).

But as Heckler said, you can avoid this by getting Questrade to transfer your TFSA over without actually withdrawing anything.
« Last Edit: December 21, 2015, 01:02:21 PM by morning owl »

young canadian

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Re: Canada TFSA previous contributions
« Reply #8 on: December 21, 2015, 01:14:20 PM »
An easy way to keep track of your TFSA is to keep an excel spreadsheet of all your contributions and withdrawals. Then you'll know exactly how much room you have.

Gains and losses don't affect contribution room. So if you deposit $5500 and it grows to $6000, when you withdraw the $6000 your limit is still $5500 (plus previous years limits).

But as Heckler said, you can avoid this by getting Questrade to transfer your TFSA over without actually withdrawing anything.

Apologies, morning owl, but not sure you're exactly right on this one. Any withdrawals you make turn into available contribution room in the next calendar year. That is to say, in your example it should have read... "So if you deposit $5,500 and it grows to $6,000 by December 2015, you are able to recontribute that full $6,000 on January 1, 2016."

More details (and examples) can be found on the CRA website: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/cntrbtn-eng.html

jambongris

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Re: Canada TFSA previous contributions
« Reply #9 on: December 21, 2015, 01:15:49 PM »
An easy way to keep track of your TFSA is to keep an excel spreadsheet of all your contributions and withdrawals. Then you'll know exactly how much room you have.

Gains and losses don't affect contribution room. So if you deposit $5500 and it grows to $6000, when you withdraw the $6000 your limit is still $5500 (plus previous years limits).

But as Heckler said, you can avoid this by getting Questrade to transfer your TFSA over without actually withdrawing anything.

I don't think that's quite right. If you've maxed out your TFSA every year such that you've contributed a total of $41,000 and it has grown over that time to $45,000 then I believe that if you withdraw all $45,000 this December then you will be able to contribute $45,000 + $5,500 in January.

If you're still uncertain though you can log in to your CRA account online and it will break down your TFSA contribution limit. I believe it gets re-calculated at the beginning of each year.

Source

Quote
How your TFSA contribution room is determined

The TFSA contribution room is made up of:
•your TFSA dollar limit plus indexation;
•any unused TFSA contribution room from the previous year; and
•any withdrawals made from the TFSA in the previous year.

young canadian

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Re: Canada TFSA previous contributions
« Reply #10 on: December 21, 2015, 01:20:35 PM »
To the OP, another option would be to simply sell whatever securities you currently hold in your TFSA with your existing financial institution on 31 December of this year, then use the cash to repurchase the assets at your new brokerage on 4 January 2016 (the first trading day of the year). This avoids the problem of having to transfer in-kind from your existing FI (who you say are being uncooperative), and will prevent you from over contributing to your TFSA.

morning owl

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Re: Canada TFSA previous contributions
« Reply #11 on: December 21, 2015, 01:21:14 PM »
My bad! I didn't explain that very well.

What I was thinking was this -- let's say you have a maxed out TFSA, which would in 2015 be at $41,000. This has grown to $44,000.

I withdraw the entire amount, as OP plans to do (as I understand it, anyway.) This would not change the contribution room. If he withdraws $44,000, his limit will still be $41,000 for 2015, not $44,000. Correct?

young canadian

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Re: Canada TFSA previous contributions
« Reply #12 on: December 21, 2015, 01:26:40 PM »
My bad! I didn't explain that very well.

What I was thinking was this -- let's say you have a maxed out TFSA, which would in 2015 be at $41,000. This has grown to $44,000.

I withdraw the entire amount, as OP plans to do (as I understand it, anyway.) This would not change the contribution room. If he withdraws $44,000, his limit will still be $41,000 for 2015, not $44,000. Correct?

I think you might be playing fast and loose with the definition of "contribution room", because from what I can gather from what you just said, you are still misunderstanding. Care to try again? (eekkk sorry if that sounded rude, not trying to be... I'm genuine, I swear).

morning owl

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Re: Canada TFSA previous contributions
« Reply #13 on: December 21, 2015, 01:30:47 PM »
OK. In 2015 I have $44,000 in my TFSA. On December 31 I close the account and withdraw the entire amount. This does not change my limit for 2015 -- it's still $41,000. When I open a new account with this money in 2016, I can only deposit $46,500 ($41,000 from the previous year, plus $5,500 from 2016.)

I know my stuff here -- am I using the wrong terminology, or misunderstanding OP's situation? Feel free to clarify...


young canadian

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Re: Canada TFSA previous contributions
« Reply #14 on: December 21, 2015, 01:36:42 PM »
OK. In 2015 I have $44,000 in my TFSA. On December 31 I close the account and withdraw the entire amount. This does not change my limit for 2015 -- it's still $41,000. When I open a new account with this money in 2016, I can only deposit $46,500 ($41,000 from the previous year, plus $5,500 from 2016.)

I know my stuff here -- am I using the wrong terminology, or misunderstanding OP's situation? Feel free to clarify...

No doubt you've got a good handle on this stuff... your new example seems accurate. I think my confusion is coming from "This does not change my limit for 2015..."... still trying to figure out what you mean by this or how this is relevant? You are correct in saying that withdrawing the full $44,000 on December 31 doesn't do anything to your available contribution room in 2015. On December 30, what is this $41,000 "limit" you are referring to? If the individual had already contributed $41,000 to his TFSA as at December 30, and had made no withdrawals, his "limit" is zero (ie: he no longer has any headroom).

morning owl

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Re: Canada TFSA previous contributions
« Reply #15 on: December 21, 2015, 01:46:05 PM »
What I'm trying to say is that gains and losses don't change someone's contribution limit, which is what I thought OP was asking (twice). The limit no matter what your gains and losses are stays the same from year to year. If you withdraw the $44,000 you don't get to put in $44,000 plus $5,500 in 2016.

Bottom line -- keep it simple and do a direct transfer:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/wn-eng.html

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/xmpl-eng.html

young canadian

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Re: Canada TFSA previous contributions
« Reply #16 on: December 21, 2015, 01:49:00 PM »
What I'm trying to say is that gains and losses don't change someone's contribution limit, which is what I thought OP was asking (twice). The limit no matter what your gains and losses are stays the same from year to year. If you withdraw the $44,000 you don't get to put in $44,000 plus $5,500 in 2016.

Bottom line -- keep it simple and do a direct transfer:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/wn-eng.html

See but that's just the thing... you DO get to contribute $44,000 + $5,500 in 2016! That's what I'm saying...

okits

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Re: Canada TFSA previous contributions
« Reply #17 on: December 21, 2015, 01:49:28 PM »
nobodyspecial, have you already filed the transfer form with Questrade?  When I transferred my TFSA I just sent that form giving directions to transfer funds from another FI and it got done.  (Read a tip somewhere to write "this is my final decision, please do not contact me" so the old place wouldn't call, trying to get me to stay.)  It's like a cowardly break up, where the new squeeze tells your old lover that it's over.  Convenient*.

If your account is over a certain size ($25k?) Questrade will cover a transfer fee (up to $125-$150, I think.)

I do think any investment gains in your current TFSA will eat up contribution room if you withdraw then re-contribute, so unless your TFSA has an overall record of being flat or in the red I would do the transfer.

* I don't actually handle my personal matters this way, but if you have some kind of "investment advisor" or account relationship manager person it probably does resemble a break-up, to some extent.

morning owl

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Re: Canada TFSA previous contributions
« Reply #18 on: December 21, 2015, 01:52:03 PM »
What I'm trying to say is that gains and losses don't change someone's contribution limit, which is what I thought OP was asking (twice). The limit no matter what your gains and losses are stays the same from year to year. If you withdraw the $44,000 you don't get to put in $44,000 plus $5,500 in 2016.

Bottom line -- keep it simple and do a direct transfer:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/wn-eng.html

See but that's just the thing... you DO get to contribute $44,000 + $5,500 in 2016! That's what I'm saying...

Read the second link I posted. The CRA disagrees with you.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/xmpl-eng.html


young canadian

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Re: Canada TFSA previous contributions
« Reply #19 on: December 21, 2015, 02:01:19 PM »
What I'm trying to say is that gains and losses don't change someone's contribution limit, which is what I thought OP was asking (twice). The limit no matter what your gains and losses are stays the same from year to year. If you withdraw the $44,000 you don't get to put in $44,000 plus $5,500 in 2016.

Bottom line -- keep it simple and do a direct transfer:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/wn-eng.html

See but that's just the thing... you DO get to contribute $44,000 + $5,500 in 2016! That's what I'm saying...

Read the second link I posted. The CRA disagrees with you.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/xmpl-eng.html

Took a read through the example you posted - the only thing different about that example are the dates... in that example, the transfer occurs in the same calendar year. In our example, the transfer spans over 2 different calendar years - very different.

From the CRA website:

How your TFSA contribution room is determined

The TFSA contribution room is made up of:

-your TFSA dollar limit plus indexation;
-any unused TFSA contribution room from the previous year; and
-any withdrawals made from the TFSA in the previous year.

Link: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/cntrbtn-eng.html

Hence, you DO get to contribute the $44,000 + $5,500 in 2016!

Don't mean to turn this into a thread high-jacking... but this is a very commonly misunderstood topic, so didn't want anyone to get confused!

nobodyspecial

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Re: Canada TFSA previous contributions
« Reply #20 on: December 21, 2015, 02:32:34 PM »
Quote
-your TFSA dollar limit plus indexation;
-any unused TFSA contribution room from the previous year; and
-any withdrawals made from the TFSA in the previous year.

Hence, you DO get to contribute the $44,000 + $5,500 in 2016!
That was my reading of the rules - although ironically the TFSA I'm closing has lost money in 2015
« Last Edit: December 21, 2015, 02:34:58 PM by nobodyspecial »

Heckler

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Re: Canada TFSA previous contributions
« Reply #21 on: December 21, 2015, 02:45:10 PM »
Just fill in the QT transfer forms and submit them to QT.  Let them deal with your old lover. ( hardly the case with a bank IMO)

If the fee to transfer out is your issue, one option might be to use the same banks discount brokerage.  For example, it cost me nothing to move funds from BMO Investments mutusl fund TFSA to a BMO Investorline self directed, where I buy ETFs for $9.95 a trade, done quarterly.

okits

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Re: Canada TFSA previous contributions
« Reply #22 on: December 21, 2015, 06:33:57 PM »
What I'm trying to say is that gains and losses don't change someone's contribution limit, which is what I thought OP was asking (twice). The limit no matter what your gains and losses are stays the same from year to year. If you withdraw the $44,000 you don't get to put in $44,000 plus $5,500 in 2016.

Bottom line -- keep it simple and do a direct transfer:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/wn-eng.html

See but that's just the thing... you DO get to contribute $44,000 + $5,500 in 2016! That's what I'm saying...

Read the second link I posted. The CRA disagrees with you.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trnsfrs/xmpl-eng.html

Took a read through the example you posted - the only thing different about that example are the dates... in that example, the transfer occurs in the same calendar year. In our example, the transfer spans over 2 different calendar years - very different.

From the CRA website:

How your TFSA contribution room is determined

The TFSA contribution room is made up of:

-your TFSA dollar limit plus indexation;
-any unused TFSA contribution room from the previous year; and
-any withdrawals made from the TFSA in the previous year.


Link: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/cntrbtn-eng.html

Hence, you DO get to contribute the $44,000 + $5,500 in 2016!

Don't mean to turn this into a thread high-jacking... but this is a very commonly misunderstood topic, so didn't want anyone to get confused!

Okay, those quoted bullet points are useful, I just wonder if there's some kind of cap to this...

Example: say you're one of the investors who maxed out his TFSA and bet big on junior resource stocks.  Your original $41k investment is now a huge $800k (there was a guy like this featured in the National Post.  The CRA is after him to pay taxes on the huge gain, for not using the TFSA "as intended".)  In this example, say he withdraws $500k from his TFSA in 2015.  Is his 2016 contribution limit then:

-your TFSA dollar limit plus indexation; ($5500 for 2016)
-any unused TFSA contribution room from the previous year; and ($0)
-any withdrawals made from the TFSA in the previous year ($500,000)

Total: $505,500?

Admittedly, not a common scenario, but what if your gains in the account mean you could withdraw significantly more than the accumulated baseline contribution room ($46,500 in 2016)?  Assuming your TFSA is that big, if you withdraw six figures from it this year do you get every dollar of that back as contribution room next year?

(OP: sorry to hear your account is in the red.  This discussion isn't immediately applicable to your transfer scenario but is informative, nonetheless.)

Stasher

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Re: Canada TFSA previous contributions
« Reply #23 on: December 21, 2015, 07:01:20 PM »

Hence, you DO get to contribute the $44,000 + $5,500 in 2016!

Don't mean to turn this into a thread high-jacking... but this is a very commonly misunderstood topic, so didn't want anyone to get confused!

This is exactly what I did when I closed my conventional TFSA in December 2014 and redeposited in brokerage TFSA January 2015.  > 2014 maxed limit + gains withdrawn + 2015 limit increase

I did all my transaction between Dec and Jan to meet the calendar year withdrawal and redeposit guidelines and meet the contribution limit guidelines.

I'll let you all know if I get a nasty CRA letter but haven't yet LOL Only time will tell.

This is only an issue if you maxed out your TFSA , if you will still be way under regardless then just worry about the calendar year rule and have fun saving those MER fees and get in that Vanguard index fund.
« Last Edit: December 21, 2015, 07:04:00 PM by Stasher »

YoungInvestor

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Re: Canada TFSA previous contributions
« Reply #24 on: December 22, 2015, 05:48:03 AM »
I would call the cra to make sure, but say I have :

1000$ deposit, which grows to 100000$ because I'm lucky.
40000$ unused room.

I withdraw the 100000$ now.

I'll be able to deposit 100 000$ + 40 000$ + 5500$ =145500$.

This is an extreme example, but any other treatment would make things run in favor of people never withdrawing anything.

Kaspian

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Re: Canada TFSA previous contributions
« Reply #25 on: December 22, 2015, 12:56:06 PM »
Yep!  You're allowed to put back in the following year whatever you take out in this.  Doesn't matter if it's $20 or $200K.

You, of course, have records that it was in one account, withdrawn, and it's now in another.  (So will the CRA.) 

That said, I'd crack the whip at the bank who's giving you a hassle.  Tell them there's not a damn thing they can do about it.

(That other link provided above is wrong for this discussion--it's presuming the withdrawal and deposit into different account (without a transfer) happen within the same taxation year.)