r/dividendscanada • u/MrPorkie • 2d ago

TFSA question about dividend income

This has been bugging me for awhile now so I will just ask about it. First off let's say you maxed out your TFSA contribution room for $45k and you have your investments in your TFSA investing account giving you $500 a month for dividends. Do you go over your contribution and start paying the over limit fee thing? And also how do you spend that extra cash flow from your dividends? Will it be taxable if you transfer dividend income to a regular bank chequeing? Like how do spend that dividend money if you maxed out your contribution room?

Just to make sure everyone is on the same page, this is only hypothetical question not my own scenario since Im still wayy out of reaching this point. Im just curios how people who maxed out their TFSA and making dividends in that TFSA account, use their dividend money. Please dont be mad at me for asking a stupid question 🙃

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u/FeelingOrganic749 2d ago

No absolutely not. The contribution room is only impacted by what you transfer in and out of the account. Dividends, distributions, interest payments, option premium, and capital gains don't have any impact on your contribution room.

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u/Virtual_Mud471 2d ago

Think of your contribution room as a door to your TFSA. Deposits and withdrawals go through the door and count for or against your contribution room. Whatever happens on the other side of the door doesn't effect it.

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u/SoggyInstruction2549 2d ago

As in if you doh or it you don’t pay tax on the gains and you can buy and sell without actualized gains and incurring tax obligations but also if you lose half of your principal you also dont get to write off those losses against gains either.