If my TFSA is worth $25000 and I only put in for 2 years ($10000), can I withdraw the $25000 and put it back in later, or am I only allowed to put the original $10000 back in (assuming this withdrawal and subsequent redeposit is done in the same calendar year)?
From what I can make out from CRA site it seems that you can definitely not redeposit in the same year (as I originally incorrectly answered to someone else, but have since corrected).
It does appear, however, that you can withdraw as much as you like, and that would generate room for the subsequent year.
As far as I can tell, it works like this:
(Note, I am assuming you were 18 on Jan 1 2009)
- 2009: 5000
- 2010: 5000
- 2011: 5000
- 2012: 5000
So by the end of 2012, you will have been allowed to contribute $20,000 of new money.
You say you've contributed $10,000, so you still can contribute another $10,000 of new money this year (But let's assume you do not...).
Now, your original $10,000 has grown to $25,000. You can withdraw this without penalty. Next year, you will be given an allotment of another $5000 of new money (bringing your total lifetime limit to $25,000 - $10,000 = $15,000 new money) PLUS, you will be allowed to re-contribute up to $25,000 of OLD money.
Of course, the government doesn't make a distinction between old and new money, so the net effect is (assuming a 25k withdrawal):
2012 limit: $10 000
2013 limit: $40 000 less 2012 contributions.
The TFSA contribution room is made up of:
- your TFSA dollar limit ($5,000 per year plus indexation, if applicable);
- any unused TFSA contribution room from the previous year; and
- any withdrawals made from the TFSA in the previous year, excluding qualifying transfers or specified distributions.
From this wording, it means the 25 k you withdraw will go to the 2013 contribution room (bullet 3). If you don't re-contribute, it will roll over into the 2014 contribution room (Under bullet 2)
For correctness, I must add that I did not include any indexing of the annual amount.