Examples – TFSA contribution room

Example 1

Brayden was eager to open his TFSA, but he didn’t turn 18 until December 21, 2015. On January 4, 2016, he opened a TFSA and contributed $15,500 ($10,000 for 2015 plus $5,500 for 2016 – 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 2016, the value in Brayden’s TFSA had increased to $16,300. Brayden was worried that for 2017, he would only be able to contribute $4,700 (the TFSA dollar limit of $5,500 for 2017 less the $800 increase in value in his TFSA through 2016). Neither the earnings generated in the account nor the increase in its value will reduce the TFSA contribution room in the following year, so Brayden can contribute up to another $5,500 in 2017 to his TFSA.

Example 2

From 2011 until the end of 2015, Josh contributed the maximum TFSA dollar limit each year. He did not make any other contributions or withdraw any funds. As a result of his $10,000 contribution in 2015, his unused TFSA contribution room at the end of 2015 was zero.

His TFSA contribution room at the beginning of 2016 was $5,500 (the 2016 TFSA dollar limit).

On June 15, 2016, Josh made a contribution of $500. On October 26, 2016, he withdrew $4,000.

His unused TFSA contribution room at the end of 2016 was $5,000 ($5,500 - $500).

Josh makes the following calculation to determine his TFSA contribution room at the beginning of 2017:

Step 1: Calculate Unused TFSA contribution room at the end of 2016

TFSA contribution room at the beginning of 2016 ($5,500) minus contributions made in 2016 ($500) = Unused TFSA contribution room at the end of 2016 ($5,000)

Step 2: Calculate TFSA contribution room at the beginning of 2017

Unused TFSA contribution room at the end of 2016 ($5,000) + total withdrawal made in 2016 ($4,000) + 2017 TFSA dollar limit ($5,500) = TFSA contribution room at the beginning of 2017 ($14,500).

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