Last week, the Canadian Government and Canada Revenue Agency (CRA) revealed the new TFSA contribution limit for 2025. The new annual limit is unchanged from 2024; however, the amount is in addition to amounts from prior years. So, if you had any contribution room this year, you’ll have some next year – even if you maxed out your prior limit. In this article, I will explore the new TFSA contribution room limit for 2025 as well as the cumulative amount that has accumulated since the TFSA launched in 2009.
$7,000 for the year
The annual TFSA contribution room limit for 2025 is $7,000. This amount is how much you can contribute to the TFSA, total, if you turn 18 in 2025. If you turned 18 before 2009, it represents how much room will be added to your existing room next year. Speaking of cumulative contribution room, I will explore that amount in the next section.
$102,000 cumulative
For Canadians who turned 18 in 2009 or earlier, $102,000 worth of contribution room has accumulated over their adult lives. That means, if you are at least 33 years old today and have not contributed to a TFSA before, you’ll have $102,000 worth of accumulated TFSA room next year. If you were younger than 33 in 2009, then you have however many dollars of contribution room accumulated over your adult life. For example, if you turned 18 this year, you will have $14,000 worth of room next year ($7,000 for this year plus $7,000 for next year).
How to invest your TFSA
Having and contributing to a TFSA is one thing, but making the most of owning one is another matter entirely. In order to get value from your TFSA you need to invest successfully – if you simply let your account sit in cash, then you will realize no tax benefits. The whole point of a TFSA is to boost your returns by removing the taxes you’d otherwise have to pay on investments. With that in mind, here’s how to invest in a TFSA successfully.
Among the best assets to hold in a TFSA are dividend stocks. Such stocks pay quarterly cash dividends that are immediately taxable if earned outside of a TFSA or RRSP. By contrast, non-dividend stocks are not taxed until you sell. This makes dividend stocks (and interest-bearing bonds) especially well suited to being held in a TFSA.
Consider Fortis Inc (TSX:FTS), for example. It’s a Canadian stock that has a relatively high dividend yield. If you hold it in a taxable account, you’ll pay taxes on those dividends (albeit offset by the dividend tax credit).
Fortis stock currently pays a $0.62 quarterly dividend. That works out to $2.48 per year. At today’s stock price of $62.99, that $2.48 provides a 3.9% dividend yield. So, if you invest $100,000 into FTS in a TFSA – definitely doable if you were 18 or older in 2009 – then you can get $3,930 back each year in income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Fortis | $62.99 | 1,588 | $0.62 | $984.56 per month ($3,938 per year) | Monthly |
As you can see, you can generate considerable passive income by holding Fortis stock. And if you hold it in a TFSA, it’s tax free!
Now, this isn’t meant to say that you should actually invest your entire $100,000 TFSA into Fortis –especially not if that TFSA represents your total portfolio. Diversification is important. However, the table above does show what can happen with high yields and tax-free compounding.
