Asked
FHSA and TFSA have a contribution max, but what happens if you are investing in those accounts and your returns are greater than contribution room? Will there be penalties?
Clint’s answer
It doesn't matter what you earn. This will not impact your taxes, nor will it impact your room for contribution in the following year. There is a comment here in trading that the CRA may deem your TFSA trading as a business. Although there is truth to this, there are many criteria that would have to be satisfied for this to occur. Examples include spending a significant amount of time daily doing frequent trades, having more than average knowledge about trading, and trading unqualified investments like foreign mutual funds. Also, if you happen to pick up a stock that pays foreign dividends you'll likely be taxed at the source and there is no foreign tax credit on TFSAs. FHSAs are not subject to the same rules, and you can also earn more than your investment without being penalized so far...
January 29, 2024
From Ask Clint: real questions from a Canadian public finance forum, answered by Clint Cole. Names are changed. This is general information, not advice for your situation, and rules and dollar figures may have changed since Clint answered. Terms