Question

Jeffrey is a 25-year old full-time salaried AI engineer. He earned $85,000 in 2017, 10% more than he earned in the previous year in Calgary. Jeffrey moved to Montreal in 2017 to take up his new position at a cost of $7,000 (funded by a withdrawal from his TFSA). He has always contributed the maximum to his RRSP and TFSA. Jeffrey takes public transit to work at a cost of $960 a year and lives alone. His employer provides a medical plan at a premium of $1,200 a year. Other than the premium, Jeffrey’s only other medical cost in 2017 was a $5,000 dental bill. He pays the maximum contribution to Employment Insurance (EI), the Quebec Pension Plan (QPP) and the Quebec parental insurance plan (PPIP). He does not contribute to an employer pension plan.

Refer to the Federal Schedule 1 for residents of Quebec at https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/quebec/5005-s1.html

                                                                            TABLE B

Tax-Free Savings Account (TFSA): Annual Limits
Years	Annual Limit	Years	Annual Limit
Year started 2009	$5,000	2014	$5,500
2010	$5,000	2015	$10,000
2011	$5,000	2016	$5,500
2012	$5,000	2017	$5,500
2013	$5,500	2018	$5,500

How much did Jeffrey contribute to his RRSP in 2017?

How much can Jeffrey contribute to his TFSA as of January 2018? Refer to Table B at the end of this case study.

Answer 1

Contribution to RRSP:

Contribution limits are calculated at 18% of prior year’s reported earned income (from employment or self-employment), up to a maximum. The maximum contribution for the year 2017 is $26,010.
In the current situation, Mr. Jeffrey has earned $85,000 in 2017 which is 10% more than he earned in the previous year in Calgary. So, his earned income for the prior period will be ($85000*100/110=$77273).
Contribution limit for 2017 is maximum of the following:

77273*18/100= $13909

So Maximum contribution for the year 2017 is $26,010.

Contribution to TFSA

The maximum annual contribution for each prior to 2013 was $5000 per year. Beginning in 2013 it was increased to $5500 per year.
From 2015 Federal budget it was raised the contribution limit to $ 10,000. Again from 2016 onwards the limit was made to $5500 per year.
As of January1,2018 the total contribution room for a TFSA is $57,500. The limit can be calculated as follows:

TFSA Annual Limit

Cumulative total

As the contribution room for a TFSA is $57,500 whereas the cumulative total is $50,500. A withdrawal in any year will increase the available contribution room, but not in the current calendar year.it can only be re-contributed starting on January 1 of the following year. So withdrawal made in 2017 of $7,000 can be contributed as of January 2018