The new year will begin with a new contribution limit for the Tax-Free Savings Accounts (TFSAs). The Canada Revenue Agency (CRA) has kept the 2026 TFSA contribution limit at $7,000. This will be the third consecutive year of a $7,000 annual limit, as interest rate changes and the trade war kept inflation and macro data uncertain. However, you can contribute more than $7,000 in a TFSA in 2026:
- If you have not used up your 2025 TFSA contribution room, it will be carried forward to 2026.
- If you made any TFSA withdrawals in 2025, they will be added to your 2026 contribution room on January 1, 2026.
If you turned 18 years in 2009, your cumulative TFSA contribution limit over the years will increase to $109,000 in 2026.
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How to use the TFSA contribution limit efficiently
The CRA releases the TFSA contribution limit annually because it has a tax benefit. Any tax benefit has an upper limit, which, if breached, loses that benefit. Make sure not to overcontribute, or you will face a 1% tax every month on the surplus amount.
The TFSA allows your money to grow tax-free, and this applies to US stocks as well. However, dividends on US stocks are taxable even in this account.
Neither is crypto a qualified investment, nor is trading allowed in the TFSA. If you breach these investment rules, you will face the same tax liability as in a non-registered account. However, that doesn’t mean you cannot invest monthly or regularly to accumulate stocks. Trading refers to buying and selling stocks frequently. However, if you keep buying the stock and holding it for a year or more, it is not trading. And if you seek exposure in crypto, there are listed Bitcoin mining stocks and ETFs that qualify as TFSA investments.
The TFSA limit can be used to invest in high-growth and high-yield stocks that can help you generate wealth over the long term. Since the contribution amount is limited, consider investing in resilient growth stocks and book profits. Instead of withdrawing the gains, you can buy dividend stocks from those gains.
For instance, a $2,000 investment in growth stocks becomes $4,000 in two years. You can sell stocks worth $2,000 to book your profit and use that amount to invest in dividend stocks. This way, even if the growth stock falls, you have already locked the gain in an evergreen dividend stock that gives a relatively assured yield. Your passive income portfolio is being built from timely profit booking.
Two TFSA stocks to buy in 2026
Hive stock
Hive Digital Technologies (TSXV:HIVE) gives you exposure to two growth super cycles: AI data centre and Bitcoin mining. It is pledging its mined Bitcoins to build Tier 3 data centres for use in AI and high-performance computing. The AI data centres cost three times more than Tier 1 data centres used in Bitcoin mining. However, if Hive lands a deal with a hyperscaler, the HPC computing business can generate an 80% operating margin. So far, its major client is Bell Canada for its AI fabric.
Hive is a stock to buy below $4 and sell at $8. The stock is supported near $3 and $3.50 due to the stability provided by the HPC cash flow. The stock could see a sharp rally because of the Bitcoin price rally. You could invest $2,000 when the stock trades below $4 and sell half the stocks when the price crosses $8.
Manulife Financial stock
The profits from the growth stock can be used to buy Manulife Financial (TSX: MFC) shares. Unlike Hive, Manulife is a large-cap stock that earns revenue from conventional financial products, such as insurance and asset management. The company has sustained since the 2008 Global Financial Crisis, which strengthened its risk management. It is now expanding in Asia through acquisitions and joint ventures.
Entering new markets will increase costs in the short term, but bring in more premiums and asset management fees, which will help it grow dividends and share price. The stock has grown its dividend at an average annual rate of 10% for the last 12 years. It can continue to grow dividends at a slower rate. Manulife also offers a dividend reinvestment plan that can help you compound dividends in the long term.
