With the new year upon us, the Canada Revenue Agency (CRA) has refreshed the Tax-Free Savings Account (TFSA) contribution limit. You can invest $7,000 in your TFSA in 2026. Moreover, if you made any withdrawals in 2025, that will also be added to your TFSA contribution room for 2026.
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Your TFSA contribution limit and contribution room for 2026
There is a difference between the two. TFSA contribution limit for 2026 is the same, $7,000, for every Canadian above 19 years of age. However, the TFSA contribution room depends on how you have used your account.
Once you turn 19, you become eligible for a TFSA, and your contribution room starts accumulating even if you have not opened a TFSA account. Those who turned 19 in 2009 and never invested in a TFSA accumulated a contribution room of $109,000 in 17 years.
As per Statistics Canada, Canadians in the 30–34 age group had an average unused TFSA contribution room of $59,110 in the 2022 tax year, when their cumulative contribution room was $81,500. This is because their withdrawals ($7,886) were more than their contributions ($7,501). A TD Bank survey found that millennials are using a TFSA as a savings account to park the money that they need in the immediate future.
You can calculate your TFSA contribution room by adding the unused TFSA contribution room from previous years and withdrawals from the last year to the $7,000 contribution limit. Also, deduct any contributions you have made so far this year.
How to maximize TSFA benefits
If you are investing in stocks in a normal account and holding them for a long term, consider investing in them through the TFSA. Because in a normal account, you pay dividend tax and tax on capital gains when you sell a stock. These taxes are eliminated in a TFSA, and you can reinvest your capital gains and compound your returns tax-free.
For instance, Lundin Gold (TSX: LUG) is a cyclical stock. If you invested $5,000 in that stock in January 2025 when Trump’s tariff wars drove the gold price upwards, your 143 shares are worth $17,000, trading at $119 per share. If you sell the stock now, you will have to pay capital gains tax on 50% of the $12,000 capital gain, which comes to $1,230 at a 20.5% tax rate. You will also have to pay dividend tax on the $630 dividend income from the 143 shares paid in 2025.
Had you invested in it through the TFSA, you would have saved all these taxes and have more investment gains and income to reinvest in the next growth stocks.
Gold is still a good investment, as rising global trade tensions make gold a safer and more reliable store of value than the US dollar. The shift in global supply chains could lead to new trade agreements in non-US dollar currencies. Central banks worldwide would want to increase their gold reserves, making gold a go-to TFSA investment.
Diversify your TSFA investment
A few stocks that are worth booking profits in are Shopify, Celestica, and Suncor Energy. The rising trade tensions between the US and Canada are pulling down Shopify stock. Also, after the first-quarter earnings release in February, the seasonal stock will decline. Celestica will be hit as trade tensions escalate, as it has been supplying Ethernet switches to US companies.
Suncor Energy is trading at its highest, crossing even its 2008 peak, which shows that the price is unsustainable. The stock price is rising on political unrest in oil-producing countries, Iran, Russia, and Venezuela.
You can book profits on the above stocks and invest in defensive plays, like grocer Loblaw and the technology sector ETF iShares S&P/TSX Capped Information Tech Idx ETF.
