A new year means new contribution room for eligible taxpayers with TFSAs, RRSPs and first home savings accounts (FHSAs).
“The most practical items we’re discussing with clients right now relate to registered accounts and contribution planning,” said Carson Hamill, an associate portfolio manager with Snowbirds Wealth Management, Raymond James Ltd., in Coquitlam, B.C.
The TFSA dollar limit is $7,000 for 2026. For someone who has been eligible to open a TFSA since its launch in 2009 and who has never contributed, total TFSA contribution room this year is $109,000.
“The only way to get that full room is … to have been 18 or over and a resident of Canada the whole time since 2009,” said Paul Thorne, director of advanced planning, estate and financial planning services with Sun Life Financial in Dartmouth, N.S. A client under age 35 wouldn’t have the full cumulative contribution room nor would a client who was a non-resident of Canada throughout any year since 2009. “You have to be careful” that you don’t overcontribute, Thorne said.
The penalty for overcontributions is 1% on the excess amount each month that the amount stays in the account.
Taxpayers shouldn’t rely on CRA’s My Account portal for information on their TFSA contribution room, because the information may not be up-to-date, especially early in the year. My Account is “a starting point,” Thorne said. “You then have to go through all of the things [i.e., TFSA transactions] you did within the last calendar year and within the current year, to make sure you’re not overcontributing.”
Thorne also highlighted the potential for overcontribution errors when money is transferred from one TFSA to another, each at different financial institutions. The financial institution should code the transaction as a transfer, not a withdrawal.
“If the information … sent to the CRA … doesn’t have the proper code, [the client] can be marked [by the CRA] as being an overcontributor,” Thorne said.
Thorne experienced such a mistake with his own TFSA, and he said several months passed between contacting the financial institution about the mistake and being cleared of the overcontribution by the CRA.
For 2026, clients can contribute 18% of their 2025 earned income to their RRSPs (less any pension adjustments), up to a maximum of $33,810 (income of $187,833 or higher) plus any unused carryforward room.
Taxpayers “overcontribute to RRSPs still quite a bit,” even though the accounts have been around for decades, Thorne said.
While a client’s notice of assessment provides their available RRSP contribution room, “clients can get tripped up, especially if they have multiple accounts at multiple institutions or are using multiple advisors,” said Aurèle Courcelles, vice-president of tax and estate planning with IG Wealth Management in Winnipeg. As an advisor, “don’t take for granted that all of the contributions to the registered plans are in accounts … with you.”
Generally, taxpayers must pay a tax of 1% per month on contributions that exceed their RRSP deduction limit by more than $2,000.
“Sometimes, you need to ask the same question [to clients] twice, two different ways, in order to make sure you’ve got the right answer,” Thorne said. For example, a client may interpret a question about their RRSP as pertaining to only the account overseen by the advisor — when the client has other RRSPs.
Thorne suggested that taxpayers also be careful about overcontribution when making large catch-up RRSP contributions. And, with individual and group RRSPs, “those all go toward the same RRSP contribution room,” he said. As an advisor, “you don’t know what you don’t know,” he said, “so you have to have that forefront knowledge to ask” — about group RRSPs, for example.
When it comes to cross-border clients, “they don’t know the rules” related to registered accounts, Hamill said. When asking clients questions, “you have to ask and dig and dissect and be annoying — which we’re good at.” For example, he has uncovered that clients who are U.S. persons had opened TFSAs, and the U.S tax system doesn’t recognize the tax advantages of the account.
Courcelles said technology has meant fewer instances of collecting cheques and doing paperwork at clients’ homes during RRSP season. As a result, he asks “is the advisor taking that time to be more proactive with their clients” by having planning conversations?
Those conversations could uncover why certain clients wait to make RRSP contributions near deadline — March 2 this year — as well as tackle the RRSP versus TFSA question, depending on client circumstances.
FHSA as a talking point
The FHSA can serve as a talking point during conversations with young clients or clients whose child has reached age 18. “One [client] conversation that has been happening a lot in recent years is, “How do I help my child purchase their home?’” Courcelles said. For advisors, talking about the FHSA “helps strengthen the relationship with the next generation,” he said.
The FHSA allows first-time homebuyers to save for a down payment on a tax-free basis. Contributions are tax-deductible, and withdrawals to purchase a first home — including from investment income — are tax-free. The account’s annual contribution limit is $8,000, and the lifetime contribution limit is $40,000.
A client could gift or loan money to a child so the child can invest in an FHSA. “That $8,000 is now growing tax-free, so you’re basically giving [the child] way more than $8,000 by the time they make the withdrawal,” Courcelles said.
He also noted that giving a child $8,000 annually is “a more palatable number” than a large down payment, which gives rise to concerns about the home as a divisible asset if the child were to divorce.
He added that the gifted money invested in the FHSA would be in the child’s control, so “you have to trust your child.”
Unlike with RRSPs, FHSA contributions must be made by Dec. 31. Contributing now, versus year-end 2026, provides for a whole year of tax-free growth. “The sooner you put your money in, the more it grows tax-sheltered,” Courcelles said.