Can you help Mike with the income tax and retirement questions that he may have?

Use your knowledge from Chapter $6$: Tax and retirement planning of the Textbook

Mike and Jen are a young couple in their early thirties. They have a $5$ year old son. Mike is a

mechanical engineer working for a large Oil and Gas company in downtown Calgary earning

$$105,000$ per year as salary. Jen is working as an independent contractor for an IT firm and

makes around $$45,000$ per year. Mike has an employer$-$sponsored pension plan to which he

contributes on a regular basis, and his employer matches his contribution. The pension plan

calculates the retirement benefit based on the average compensation $($salary and bonuses$)$ of

the $3$ best consecutive years in the last $5$ years of employment. Although Jen is working as an

independent contractor, she has an option to contribute to the pension plan sponsored by her

employer. She has been contributing to her pension plan since she started working for this firm.

However, unlike Mike's pension plan, Jen's pension benefits, at retirement, will depend on how

the contributions were invested. Both Mike and Jen have self$-$directed individual RRSP

accounts. They have also opened an RESP to finance their son's higher education. Mike

developed a lot of interest in investing after he had taken an Investment course at SAIT about $5$

years ago. Mike trades mainly stocks in his TFSA account. However, he has a non$-$TFSA self$-$

trading account with RBC Direct Investing where he invests in both stocks and bonds. Mike

needs your help in figuring out the tax consequences of returns from different investments he

has and with his retirement planning.

Income Tax:

What is Mike's marginal tax rate?

Mike knows he doesn't have to pay taxes on the income from investment in his TFSA

account. Does he get a tax break for the contribution he makes to his TFSA?

Mike is going to file his $2017$ tax return soon. In $2017,$ he earned $$2,000$ in dividend form a

publicly traded Canadian Corporation, $$1,000$ in capital gain and $$500$ in interest income from

his investment in the non$-$TFSA account. How much will he have to pay in taxes on his

investment returns?

Does he get a tax break on RRSP contribution? How is RRSP different from TFSA?