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Question 5/72
Thomas, a resident of Ontario, is a full-time university student. He does food delivery to supplement his income. During the school year, he works on weekends and works full-time during his summer break.
Thomas' pensionable earnings were $16,000 for the year. How much must Thomas contribute to CPP when CPP contribution rate is 5.95%?
Thomas' pensionable earnings were $16,000 for the year. How much must Thomas contribute to CPP when CPP contribution rate is 5.95%?
Correct Answer: B
Explanation
Thomas must contribute to CPP based on his pensionable earnings, which are his income from employment or self-employment that are subject to CPP. However, he can deduct a basic exemption amount from his pensionable earnings, which is $3,500 for the year. Therefore, his contributory earnings are:
16,0003,500=12,500
The CPP contribution rate is 5.95% for employees and self-employed workers. Therefore, Thomas must contribute:
12,500×5.95%=743.75
References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.3:
Canada Pension Plan (CPP), page 6-101
Canada Pension Plan - How much could you receive - Canada.ca2
Thomas must contribute to CPP based on his pensionable earnings, which are his income from employment or self-employment that are subject to CPP. However, he can deduct a basic exemption amount from his pensionable earnings, which is $3,500 for the year. Therefore, his contributory earnings are:
16,0003,500=12,500
The CPP contribution rate is 5.95% for employees and self-employed workers. Therefore, Thomas must contribute:
12,500×5.95%=743.75
References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.3:
Canada Pension Plan (CPP), page 6-101
Canada Pension Plan - How much could you receive - Canada.ca2
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