The Canada Revenue Agency (CRA) assessed $166.2 million in tax-free savings account (TFSA) excess taxes in 2024, up from $130.8 million in 2023, the agency said in an email to Investment Executive.
TFSAs are subject to a 1% tax per month on the overcontribution amount.
About 133,000 out of 19.3 million account holders (0.7%) were found to have overcontributed to their TFSA, with an average tax of $1,252.22 assessed per person. That compares with 117,000 overcontributors in 2023, with an average excess tax of $1,118.39.
The number of TFSA holders who overcontributed has far outpaced overall account growth. While the number of people with a TFSA grew to 19.3 million from 12.7 million between 2015 and 2024 (a 52% increase), the number of account holders who overcontributed quadrupled to 133,000 from 33,000 in the same period.
Likewise, the total TFSA excess tax assessed ballooned more than tenfold, to $166.2 million in 2024 from $15.2 million in 2015. The average tax assessed rose to $1,252.22 last year from $457.75 in 2015 .
Registered retirement savings plan (RRSP) excess contributions also incur a tax of 1% per month on amounts that exceed the account holder’s RRSP deduction limit, but come with a $2,000 grace amount. The CRA said it couldn’t provide data on RRSP contributions because they are tracked differently.
“This situation is generally within the individual’s control and usually happens when they have been negligent with their RRSP investments and their tax obligations,” a CRA spokesperson said.