TFSA Withdrawals and The Re-Contribution Rule

  • Flexible Withdrawals – TFSA withdrawals are fully flexible with no restrictions on how or when the funds are used, unlike FHSAs (qualifying home purchase) or RESPs (education only)
  • Re‑Contribution – Amounts withdrawn from a TFSA can be re‑contributed once contribution room becomes available
  • Penalty for Over‑Contribution – CRA charges a 1% penalty for each month of excess TFSA contribution


Timing Matters

  • Within the Calendar Year – If you have fully maximized your TFSA contributions, withdrawn funds cannot be replaced in the same calendar year, otherwise it will be considered and over-contribution
  • After January 1: Withdrawn funds from the TFSA become available for re‑contribution at the start of the next calendar year


Available Contribution Room

If you haven’t maxed out your TFSA, you can contribute in the same year of the withdrawal using your unused room. The amount withdrawn is added back to your contribution room on January 1 of the following year