Your TFSA Contribution Room Could Be Larger Than You Think

Shopify Inc (TSX:SHOP) stock has delivered large returns. Those who cashed out TFSA SHOP positions may have more room than they think.

Andrew Button

Author Bio

Andrew “A.J.” Button is a financial writer with a longstanding interest in value investing and international markets. He began investing at a young age, building a portfolio of dividend stocks to help pay for university. After stepping away from investing for a time, he rediscovered his passion in 2019 when he began working as a freelance financial writer. Since then, Andrew has built a diversified investment approach spanning Canadian, U.S., and international equities, as well as guaranteed investment certificates (GICs) and money market funds. He is particularly interested in international stocks, drawn to their dividend potential and long-term growth opportunities, while maintaining an interest in Canadian businesses. Before joining The Motley Fool, Andrew worked as a freelance copywriter specializing in financial services. He continues to write for financial publications and share his thoughts on stocks through social media.

Education and Professional Credentials

Canadian Securities Course (CSC)
CFA Program Level I examination completed

Areas of Expertise

Value investing, Canadian equities, U.S. stocks, international equities, dividend investing, long-term investing, GICs, money market funds, and portfolio diversification.

Social Media Profiles

Published November 11, 3:45 pm EST

$109,000.

That’s the amount of tax-free savings account (TFSA) contribution room that has accumulated since the program started, as of 2026.

Canadians who were 18 or older in 2009, and never ceased being Canadian tax residents, have accumulated at least that much room by now.

Many people think that $109,000 is the highest amount of TFSA contribution room a person can have.

That’s actually not true.

Because of TFSA account rules, it’s actually possible to have more room than has accumulated for a TFSA user over the life of the TFSA program.

In this article, I’ll explore how that’s possible.

moving into apartment — Source: Getty Images

The return of contribution room after a year

The mechanism by which TFSA contribution room can exceed the accumulated annual amounts is the return of room a year after withdrawal.

If you withdraw any amount of money from a TFSA, you get that amount of contribution room back on January 1 of the following year.

Because of this mechanism, you can actually have a lot more TFSA contribution room than has accumulated through annual additions of room.

How it might work

Depending on the returns you earn in your account, you could find yourself with a massive amount of contribution room the year following a large withdrawal.

Let’s imagine that you bought $10,000 worth of Shopify (TSX: SHOP) stock on its IPO date and held to today. SHOP went public in 2015; more than $10,000 worth of TFSA room was available to Canadians at that time. Because of the massive return SHOP realized in that period, you’d have a position worth $602,000 today. If you cashed out all of it this year, then you’d gain an equivalent amount of contribution room back on January 1, 2027. So, as we can see, it’s quite possible for Canadians to have much more TFSA contribution room than has accumulated over the life of the TFSA program.

Things to keep in mind

As we’ve seen, it’s quite possible to have more TFSA room than has accumulated over the life of the TFSA program.

You might think that sounds enticing. However, there are some caveats to keep in mind here:

To gain extra room, you need to make withdrawals from your TFSA. This disrupts the process of compounding.
Unless you have already realized large returns in your TFSA, you can’t increase your room much by making withdrawals.
For these reasons, the “increase” in TFSA room from making gains and cashing them out is basically a technicality. It does not actually increase your capacity for tax-free compounding.

All that being said, the fact that TFSA room returns after a period gives account holders a lot of flexibility. If you want to cash out some of your TFSA gains to spend on daily life, then you can do so, and it won’t disrupt the process of compounding all that much, provided you diligently refill your TFSA with funds over time. That’s a definite good quality of TFSAs that most other accounts don’t have. So, TFSA investing can make a lot of sense.