Question

Rita’s Tax Free Savings Account contribution room as of the beginning 2019 was $63,500. During the...

Rita’s Tax Free Savings Account contribution room as of the beginning 2019 was $63,500. During the year, she contributed $63,500 but later in the year withdrew $7,500 from her account. What contribution could Rita make in 2019 without incurring a penalty?

a. $6,000

b. $7,500

c. $63,500

d. $0

The answer is $0 but I would like to know how to solve this. Thank you.

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Answer #1

Rita’s Tax Free Savings Account contribution room as of the beginning 2019 was $63,500. In TFSA if any withdrawals are made, the amount you withdraw can be put back in your TFSA starting the following year without impacting your contribution room. Means, In 2019 Rita will not incur any penalty and she doesn't need to contribute anything extra. She just needs to pay that at the start of next year.

That is why the answer is zero.

If the question was asked about 2020, then it would have been different

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