Examples – TFSA contribution room

Example 1

Brayden was eager to open his TFSA, but he didn’t turn 18 until December 21, 2016. On January 4, 2017, he opened a TFSA and contributed $11,000 ($5,500 for 2016 plus $5,500 for 2017 – 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 2017, the value in Brayden’s TFSA had increased to $11,800. Brayden was worried that for 2018, he would only be able to contribute $4,700 (the TFSA dollar limit of $5,500 for 2018 less the $800 increase in value in his TFSA through 2017). 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 2018 to his TFSA.

Example 2

From 2011 until the end of 2016, 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 $5,500 contribution in 2016, his unused TFSA contribution room at the end of 2016 was zero.

His TFSA contribution room at the beginning of 2017 was $5,500 (the 2017 TFSA dollar limit).

On June 15, 2017, Josh made a contribution of $500. On October 26, 2017, he withdrew $4,000.

His unused TFSA contribution room at the end of 2017 was $5,000 ($5,500 - $500).

Josh makes the following calculation to determine his TFSA contribution room at the beginning of 2018 as follows:

Step 1: Calculate Unused TFSA contribution room at the end of 2017

TFSA contribution room at the beginning of 2017 ($5,500) minus contributions made in 2017 ($500) = Unused TFSA contribution room at the end of 2016 ($5,000)

Step 2: Calculate TFSA contribution room at the beginning of 2018

Unused TFSA contribution room at the end of 2017 ($5,000) + total withdrawal made in 2017 ($4,000) + 2018 TFSA dollar limit ($5,500) = TFSA contribution room at the beginning of 2018 ($14,500).

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