The TFSA (Tax-Free Savings Account) contribution limit has been increased by $7,000 for 2025. This is the same contribution limit increase as in 2024. The contribution limit increase is based on the level of inflation for the year.
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The TFSA contribution rises with inflation
In 2023, inflation was very high, so the CRA (Canada Revenue Agency) justified a $500 increase to $7,000 for 2024. However, elevated interest rates have effectively tamed strong inflation, so there was no justification to increase the $7,000 limit for 2025.
If you turn 18 years of age in 2025, you will be able to contribute the equivalent of the new contribution limit ($7,000). While it is not much to start with, you will see your total contribution limit increase in every subsequent year as the CRA continues to annually increase the contribution limit.
Many Canadians can invest $102,000 in their TFSA
If you were born in 1991 or earlier and were a Canadian resident during and since that period, you can contribute a grand total of $102,000 after the 2025 increase is contemplated. If you were born after 1991, you will have to calculate your total contribution limit.
You can find your personal total contribution capacity on the CRA My Account for Individuals. It is smart to check it out because there can be steep fines for overcontributing to your TFSA.
The new TFSA contribution room is always a good thing for Canadians. The more you can invest tax-free, the faster you can compound your personal wealth.
Regularly contributing to your TFSA, thoughtfully investing, and patiently waiting for your investments to compound is a great long-term recipe for success. If you are wondering what types of stocks to hold in a TFSA, here are three unique ideas.
A dividend stock for income
If earning passive income tax-free is an attractive investment strategy, Pembina Pipeline (TSX: PPL) is an attractive stock. The company is a leading energy infrastructure provider in Western Canada.
With natural gas prices starting to recover, it could see an increase in volumes and sales through its infrastructure.
The company has a great 5.3% dividend yield, a strong balance sheet, and opportunities for modest growth. It’s a low-risk bet for earning TFSA passive income.
A Canadian growth stock
If a growth strategy is more in your wheelhouse, a stock like Aritzia (TSX: ATZ) is worth holding in a TFSA. While it operates in the somewhat volatile retail sector, the company has executed a very strong growth strategy. Its stock is up 183% in the past five years.
Aritzia has a strong presence in Canada. However, it is quickly growing in America and internationally. It could double or even triple its current store count from here.
So far, U.S. consumers have been readily adopting the brand. That has fuelled very good recent results. Add this stock to your TFSA on any dips, and you could do very well.
A stock for value, income, and growth (hopefully)
If you are looking for value, Enghouse Systems (TSX: ENGH) could be an interesting TFSA addition. It is a software provider in the communications sector. Enghouse’s growth has recently moderated, and the stock has been depressed.
However, the company has a huge pile of cash that could be deployed into accretive acquisitions. If it can get its merger and acquisition playbook rolling, there could be considerable upside in the stock. It is very cheap today and trades with a 3.3% dividend yield.
