Examples – TFSA contribution room
Brayden was eager to open his TFSA, but he didn’t turn 18 until December 21, 2018. On January 4, 2019, he opened a TFSA and contributed $11,500 ($5,500 for 2018 plus $6,000 for 2019 – the maximum TFSA dollar limits for those years). On the advice of his broker, he had opened a self-directed TFSA and invested in stocks that increased in value. By the end of 2019, the value in Brayden’s TFSA had increased to $12,300. Brayden was worried that for 2020, he would only be able to contribute $5,200 (the TFSA dollar limit of $6,000 for 2020 less the $800 increase in value in his TFSA through 2019). Neither the earnings produced in the account nor the increase in its value will reduce the TFSA contribution room in the following years, so Brayden can contribute up to $6,000 in 2020 to his TFSA.
From 2013 until the end of 2018, Josh contributed the maximum TFSA dollar limit each year. As a result of his $5,500 contribution in 2018, his unused TFSA contribution room at the end of 2018 was zero.
His TFSA contribution room at the beginning of 2019 was $6,000 (the 2019 TFSA dollar limit).
On June 15, 2019, Josh made a contribution of $500. On October 26, 2019, he withdrew $4,000.
His unused TFSA contribution room at the end of 2019 was $5,500 ($6,000 – $500).
Josh calculated his TFSA contribution room for the beginning of 2020 as follows:
Step 1: Calculate Unused TFSA contribution room at the end of 2019
TFSA contribution room at the beginning of 2019 ($6,000) minus contributions made in 2019 ($500) = Unused TFSA contribution room at the end of 2018 ($5,500)
Step 2: Calculate TFSA contribution room at the beginning of 2020
Unused TFSA contribution room at the end of 2019 ($5,500) + total withdrawal made in 2019 ($4,000) + 2020 TFSA dollar limit ($6,000) = TFSA contribution room at the beginning of 2019 ($15,500).
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