1 Important TFSA Update Coming in 2022

The CRA’s announcement of the new limit is the most important update that TFSA users await every November.

| More on:

Tax-free money growth is the primary benefit of the Tax-Free Savings Account (TFSA) in Canada. However, Canada Revenue Agency’s (CRA) announcement of the new limit every November is the most important update to TFSA users. For 2022, the limit is unchanged and it has been $6,000 the last three years.

Nevertheless, account holders aren’t complaining because money set aside in 2021 can be put to good use. Along with the new annual limit is the higher cumulative limit ($81,500) for those who were 18 in 2009 but without a TFSA yet. Also, users can add their unused contribution room this year to their 2022 limit.

Preferred eligible investment

All TFSA users can hold a combination of investments in the unique investment accounts. Cash is okay, although you maximize the tax-free benefit by holding income-producing assets instead. Most TFSA users prefer dividend stocks.

Besides the higher returns and dividend reinvestment opportunity, the CRA doesn’t consider dividend earnings as taxable income. Be warned, however, that dividends from foreign stocks are subject to a 15% withholding tax. Another valuable feature is that you can withdraw funds anytime and not incur taxes whatsoever.

Buy-and-hold asset

If you’re new to the TFSA and dividend investing, buying shares of the dividend pioneer is a great start. The Bank of Montreal (TSX:BMO)(NYSE:BMO), whose dividend track record is 192 years, started the practice of sharing a portion of profits with shareholders.

Canada’s third-largest bank is ideal for long-term investors or retirees because the dividend payouts are safe and sustainable. It’s like having a pension-like income source in the sunset years. TFSA users can earn two ways from the bank stock, from dividends and price appreciation.

Your new TFSA limit can purchase nearly 45 BMO shares ($134.11 per share). The $89.93 billion bank pays a decent 3.97% dividend. On December 3, 2021, the dividend pioneer announced a 25% hike in payouts, the most significant percentage increase by a Big Bank.

The generous increase reflects BMO’s strong earnings performance in fiscal 2021. In Q4 fiscal 2021 (quarter ended October 31, 2021), net income rose 36% to $2.16 billion versus Q1 fiscal 2020. The bank should have no problems navigating the challenging environment in the months ahead.

Perfect complement

If you have unused contribution room in 2021, Imperial Oil (TSX:IMO) is the perfect complement to BMO. The $30.87 billion oil & natural gas producer has an equally outstanding dividend track record (140 years). Moreover, the energy stock has raised its dividends for 26 consecutive years.

In Q3 2021, Imperial Oil’s revenue and other income soared 71.6% to $10.23 billion compared to Q3 2020. However, it was the more than 30,000% year-over-year growth in net income that impressed investors the most. Chairman and CEO, Brad Corson, emphasizes that the $908 million profit wasn’t due to higher commodity prices only.

Corson said the company reduced its overall cost structure and improved reliability. Apart from capturing maximum value, he said the twin moves ensure Imperial Oil’s resiliency in case a downturn occurs in the future.

You only need one TFSA

A gentle reminder is that opening multiple TFSA accounts won’t increase your contribution limits. The individual maximum limit applies, regardless of the number of accounts you have.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

1 Consumer Staples Stock That Thrives in Any Economy

Backed by consistent sales and smart expansion, this top consumer staples stock proves why essential businesses can offer stable gains…

Read more »

Dividend Stocks

1 Magnificent Canadian Stock Down 22% to Buy and Hold for Decades

This top TSX stock has increased its dividend annually for the past 29 years.

Read more »

Canadian Dollars bills
Dividend Stocks

How to Invest $250,000 in Canadian Dividend Stocks for $12,027 Each Year

Here's how to make the ideal portfolio to never worry about anything again.

Read more »

social media scrolling on phone networking
Dividend Stocks

I’d Put My Entire TFSA Into This 7.6% Dividend Giant

Telecom stocks can be risky these days, but this one offers up safety in spades.

Read more »

hand stacking money coins
Dividend Stocks

6% Dividend Yield? I’m Buying and Holding This TSX Stock for Decades

The earnings and cash flow of this Canadian company is likely to grow at a mid-single digit rate, driving its…

Read more »

Financial analyst reviews numbers and charts on a screen
Dividend Stocks

How to Build a $50,000 Portfolio That Can Weather Any Market Storm

With proper asset allocation and a long-term mindset, you can create a portfolio that’s resilient in downturns and capable of…

Read more »

Hourglass and stock price chart
Dividend Stocks

1 Stellar Stock Down 17% to Buy and Hold Forever

CN stock is one of the best stocks out there, especially as it continues to expand.

Read more »

the word REIT is an acronym for real estate investment trust
Dividend Stocks

6% Monthly Passive Income! This Dividend Stock Works While You Sleep

By owning 2,000 shares of this high-yield Canadian dividend stock, investors can generate $116 in monthly income.

Read more »