The Tax-Free Savings Account (TFSA) is arguably the most versatile wealth-building tool available to Canadians today. Launched in 2009, the TFSA allows investors to generate capital gains, dividends, and interest income entirely tax-free.
The maximum cumulative contribution room in the registered account has now risen to $109,000 in 2026. In addition to a growing contribution base, the TFSA is attractive for its withdrawal flexibility. However, the very flexibility that makes the TFSA so popular often leads to a dangerous sense of complacency among retail investors.
- Several Canadians treat the TFSA as a high-frequency trading platform, which could trigger an audit by the Canada Revenue Agency. If the user is found guilty, the CRA will levy penalties that will erode years of hard-earned gains.
- The CRA has collected millions in penalties and taxes from TFSA holders in recent years, targeting violations that many investors don’t realize they’re committing until they receive an audit assessment.
- Over-contribution errors remain the most frequent violation, triggering automatic 1% monthly penalties on excess amounts. Investors who withdraw funds often forget that the contribution room doesn’t reset until the following calendar year, leading them to exceed limits when reinvesting the same year.
- Finally, several Canadian residents use the TFSA as a “savings account,” not an “investment” account. It’s essential to understand that you can own qualified investments in the TFSA, such as stocks, bonds, exchange-traded funds, and mutual funds, and create a diversified portfolio.
TFSA holders should aim to generate inflation-beating returns while protecting their tax-sheltered gains. Here’s one undervalued tech stock Canadians can hold in the TFSA in 2026.
An undervalued TSX stock to own today
Valued at a market cap of $2.2 billion, Lightspeed Commerce (TSX:LSPD) is a fintech stock down 90% from its all-time highs. The company provides cloud-based software and payment solutions for retailers, restaurants, and golf courses.
Lightspeed Commerce delivered its second consecutive quarter of beating revenue and profit expectations, which indicates that its strategic pivot to focus on North American retail and European hospitality is gaining traction.
In fiscal Q2 (ended in September), Lightspeed increased revenue by 15% year over year, while adjusted EBIDTA (earnings before interest, tax, depreciation, and amortization) increased by 53% to US$21.3 million.
The commerce platform added approximately 2,000 net new customer locations during the quarter as its core growth markets accelerated to 7% year-over-year expansion from 5% in the previous period.
Software revenue climbed 9% to US$93.5 million while software average revenue per user increased 10% as the company attracts larger, more sophisticated merchants.
Transaction-based revenue jumped 17% to US$215.8 million, driven by gross payments volume growth of 22%. Payment penetration reached 43% of gross transaction value, up from 37% a year earlier. Monthly ARPU hit a record US$685, up 15% year over year. AI now resolves over 80% of inbound chat interactions on flagship products, allowing Lightspeed to reduce support headcount.
Software gross margins expanded to 82% from 79% a year ago, largely driven by AI-driven cost efficiencies. New AI-powered tools launched during the quarter include an AI showroom for retailers, automated website builders, and AI-generated product descriptions that have created approximately 57,000 unique descriptions since August.
The company ended the period with US$463 million in cash and expects to deliver free cash flow breakeven or better for the full fiscal year. Management raised the fiscal 2026 outlook to at least 12% revenue growth, at least 15% gross profit growth, and at least US$70 million in adjusted EBITDA.
LSPD is forecast to end fiscal 2029 with adjusted earnings per share of US$1.14, compared to US$0.45 in 2025. If the tech stock is priced at 25 times forward earnings, which is reasonable, it could more than double over the next two years.
