Janet was born in Ireland but moved to Canada in 2016 two months after her 17th...

Janet was born in Ireland but moved to Canada in 2016 two months after her 17th birthday. In total, she made $8500 worth of TFSA contributions however she took out $1000 for a vacation in January 2019 and $1600 in Oct 2019 from her TFSA. What is her TFSA contribution limit for 2020?

a) $5,900

b) $11,400

c) $14,500

d) $20,000

e) $17,400

Solutions

Expert Solution

$14,500. (Part C)

____

Explanation:

An individual can contribute to TFSA only after he/she has attained the age of 18 years. Janet attained the age of 18 years in 2017. Therefore, she can start making contributions from year 2017 only. For each year, the maximum contribution limit to TFSA is set by the government. The TFSA contribution limit for 2020 will be the cumulative total value of contribution that can be made by Janet from year 2017 to 2020 after adjustments for total contributions and withdrawals actually made. Withdrawals made during a particular will be added to the next year's unused contribution room provided it doesn't result in the total amount of contribution actually made to exceed the total amount permissible.

TFSA Contribution Limit for 2020 = TFSA Contribution Limit for 2017 + TFSA Contribution Limit for 2018 + TFSA Contribution Limit for 2019 + TFSA Contribution Limit for 2020 - Contributions Made Till Date = 5,500 + 5,500 + 6,000 + 6,000 - 8,500 = $14,500

The amount of withdrawals will not be added back in the given case as the maximum amount of contribution that can be made by Janet upto 2020 is $23,000 (5,500 + 5,500 + 6,000 + 6,000 = $23,000) as per the applicable rules. If we add the the amount of withdrawals, the total amount contributed would become $25,600 (23,000 + 1,000 + 1,600) which would exceed the the total permissible amount of $23,000.

ekkarill92 answered 1 year ago

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