If you are 18 or older, you got $7,000 worth of TFSA contribution room on January 1 of this year. If you turn 18 later in the year, you will get the contribution room on your birthday, when you become eligible to open a TFSA. Either way, that’s $7,000 of newly available tax-free compounding to enjoy. In this article, I’ll share everything you need to know about the $7,000 worth of TFSA contribution room the Federal Government added for 2025.
TFSA contribution room defined
Your “TFSA contribution room” is the amount of money you can contribute to a TFSA. It includes the following:
- Amounts of contribution room added during your lifetime minus withdrawals made this year.
- Amounts of contribution room you re-gained the year after you made a withdrawal.
TFSA contribution room is valuable because it allows you to invest tax-free. Many stocks pay dividends, which are automatically taxable. Non-dividend stocks become taxable when you sell them — you can avoid paying taxes on non-dividend stocks by holding them for the long term.
Taxes are a major drag on investment returns. If you realize a $100,000 return and are taxed 30% on it, then your actual return is $70,000. So, investing in a TFSA and avoiding taxes ultimately boosts your returns — assuming your returns are positive. If you incur losses in your TFSA, then the account’s non-taxable status prevents you from using your losses to reduce your taxes.
What “$7,000 worth of contribution room” means
“$7,000 worth of contribution room added in 2025” means that investors got an additional $7,000 worth of room in 2025. It does not necessarily mean that you personally have exactly $7,000 worth of room. Your personal room consists of
- All the room added in the years you were eligible to open an account;
- Minus withdrawals made this year; and
- Money regained the year following a withdrawal.
Whenever you make a withdrawal from a TFSA, you lose the equivalent amount of contribution room for the year. However, you gain it back on January 1 of the next year. So, your TFSA contribution room could potentially be more than the amount accumulated by all Canadians since 2009, which is $102,000.
How to find your total contribution room
You can find your TFSA contribution room on CRA MyAccount. It is listed under the pensions and retirement accounts section on the website’s left-hand navigation panel.
How to invest in a TFSA
Generally speaking, it is best to hold interest and dividend-paying assets in a TFSA. The reason is, you can’t avoid taxes on such assets in a taxable account — with non-dividend stocks, you can.
We can illustrate the tax-saving power of the TFSA by looking at iShares Core Canadian Universe Bond Index ETF (TSX:XBB). It is a diversified bond fund that invests in a combination of Canadian government bonds and Canadian corporate bonds.
XBB pays $0.08 per unit per month, or $0.96 per year. At today’s price of $28.42, that dividend provides a 3.37% yield. If you invest $100,000 in XBB, you get $3,370 back in annual dividends. Here’s the math on that:
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| XBB ETF | $28.42 | 3,519 | $0.08 per month ($0.92 per year) | $281.52 per month ($3,378 per year) | Monthly |
If you hold XBB in a taxable account and have a 33% marginal tax rate, you pay $1,125 in taxes. As a bond fund, XBB isn’t eligible for the dividend tax credit. If you hold XBB in a TFSA, you pay no taxes on it. So, holding bond funds in a TFSA can be wise.
