The Canada Revenue Agency (CRA) wants you to know that you’re probably leaving money on the table. There’s a simple way to generate thousands of dollars in extra passive income every year. Best of all – it’s completely tax-free. However, more than half of all Canadian savers are missing out on it
Here’s what the CRA wants you to know and what you can do to claim your tax-free passive income right away
The CRA regularly dives into the numbers and publishes reports about the country’s most popular savings schemes. Perhaps the most noteworthy is the Tax-Free Savings Account (TFSA).
According to the CRA, the average Canadian taxpayer had an average of $30,947 in unused TFSA contribution room in 2017. According to my calculations, the unused contribution room is likely closer to $40,000 by now. Put simply, most people haven’t maximized their TFSA contribution room.
That’s a tragic blunder. Any capital gains or dividends earned in the TFSA are, of course, tax-free. So if the average unused TFSA contribution of $40,000 was invested in a high-yield dividend stock that pays 8%, the average Canadian is missing out on $3,200 in passive income every year! That’s the equivalent of a month’s salary for most.
Best TFSA stocks
Simply maximizing your TFSA contribution room is the first step to financial freedom. However, I understand the apprehensions most people have when picking stocks to invest in. The stock market seems complicated, volatile and unwieldy. I get that.
Which is why I recommend you focus your TFSA on a stock that you know intimately. A brand that you have regular interactions with or probably work for. BCE Inc. (TSX:BCE)(NYSE:BCE) is an excellent example.
With 9.9 million subscribers, nearly a third of Canada’s population is already a Bell customer. You may have been an unsatisfied customer with plenty of complaints about their service, but you can’t deny the fact that they’re probably making a ton of money off you. That’s what allows them to offer their shareholders a lucrative 5.9% dividend yield.
By purchasing BCE stock in your TFSA, you can partake in BCE’s resilient and profitable business. Make the country’s largest wireless service provider work for you!
A maxed-out TFSA ($69,500) invested in BCE stock should generate roughly $4,100 in annual or $341 in monthly passive income. The CRA cannot touch this! All that money is tax-free and can be used to meet your living expenses right away. That’s what makes it better than earned income or a government stimulus check.
The fact that Canadians have left tens of thousands of dollars in unused TFSA contribution room is a pity. In a country with high taxes and high costs of living, every little bit helps. By maximizing your TFSA and investing the amount in high-yield, super-safe and well-recognized dividend stocks like BCE, you could generate tremendous passive income.
Take the easy path to financial freedom.
Looking for more quality stocks? Here's a list.
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Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.