Scenario 1: Young Couple No Children

Michael and Jessica are a young couple living in their condo in Vancouver.  How will the budget affect them?

Michael and Jessica are a young couple living in their condo in Vancouver.  Condo fees are $250 per month. They have no children and both work earning a total of $100,000.  Michael has a registered pension plan at work but Jessica does not.  Jessica has accumulated a small RRSP.  The couple has no TFSA savings.

Will Michael and Jessica be better off in 2015 than in 2014?

This couple is generally unaffected by changes announced in October 2014 or the 2015 Budget changes.  If income in 2015 is unchanged from 2014, the couple’s taxes will be reduced slightly as a result of indexation of personal amounts and tax brackets.  Depending on income levels, Michael or Jessica may pay slightly more in Employment Insurance Premiums and contribute more to CPP in 2015 as a result of the increase in the maximum insurable and pensionable earnings.

This couple has the potential to derive major benefits from increase in TFSA contribution room.  As a young couple, they have a significant period to make contributions to their own TFSAs to generate a significant tax-free retirement income.  If fact, with Michael’s pension plan, their TFSA accumulations could be more than enough to support a comfortable lifestyle in retirement.  Jessica need not use her RRSP contribution room at all – at least until her income is in the highest tax bracket.