Your TFSA room does not back-date to your eighteenth birthday

Search for TFSA contribution room and you will find one large cumulative number, quoted as though it belongs to everyone. It belongs to someone who has been a resident of Canada every year since 2009 and was already 18 then. If you arrived as an adult, your number is smaller, sometimes by a great deal, and the penalty for assuming otherwise is charged monthly.

The rule, in one sentence

Two conditions have to be true for a year to earn you room: you were 18 or older, and you were a resident. Someone born in Canada in 1990 satisfies both from 2009 onward. Someone who arrived in 2020 at the age of 35 satisfies both only from 2020, and the eleven years before that are worth nothing to them, however old they were.

What that is worth, in dollars

Believed room:   $109,000        Actual room:  $21,000
Contributed:     $109,000        Excess:       $88,000

Tax:  1% of the highest excess, every month it remains
      $880 a month,  $10,560 a year

The account earns nothing that outruns this. The only fix is to withdraw.

The other trap, which catches residents too

Money you withdraw does not become available again until 1 January of the following year. Take $10,000 out in March and put $10,000 back in August of the same year, and the second one is an over-contribution even though the balance never rose above where it started. This is the single most common TFSA mistake among people who have lived here their whole lives, and it stacks with the first one.

The two accounts people confuse with it

The TFSA is one of three registered accounts a newcomer meets in the first year, and the rules for room could hardly be more different.

So in your first year the RRSP is the account to leave alone and the FHSA is the one to open, even with nothing in it, because its clock starts at opening rather than at arrival. That is the opposite of what most people do, and it is the single highest value hour in a newcomer's first year.

How to check rather than believe

1. Sign in to CRA My Account and read the figure there. It is the only authoritative one.
2. Treat it as a floor, not a ceiling. The CRA's number lags: it is built from what institutions have reported, so a contribution made this year may not be in it yet.
3. Keep your own record of every contribution and withdrawal, with dates. If the two ever disagree, yours is the one with evidence behind it.
4. If you have already over-contributed, withdraw the excess now rather than at year end. The tax is charged monthly on the highest excess in each month, so a month earlier is a month cheaper.