For 2026, regardless of continued will increase in the price of dwelling for Canadians, the federal government has determined to maintain the Tax-Free Financial savings Account (TFSA) contribution restrict at $7,000.
It’s not perfect, nevertheless it’s nonetheless some of the beneficiant tax-sheltered accounts accessible wherever. At any time when I speak to U.S. buyers, the widespread theme is how restrictive their tax-advantaged accounts are in contrast with what Canadians have entry to.
One query I get always is easy on the floor however tough in observe. How do you really calculate your TFSA contribution room? The trustworthy reply is that it could actually get difficult. It is determined by whenever you grew to become a resident of Canada, the yr you had been born, how a lot you’ve got contributed over time, and whether or not you’ve got ever made withdrawals.
Fortuitously, there are stable instruments accessible to assist, together with a dependable calculator from MoneySense. Earlier than counting on any instrument, although, it helps to know the essential math behind the utmost quantities.
Calculating TFSA contribution room
Right here is the underside line upfront: the utmost TFSA contribution room that any Canadian can have in 2026 is $109,000, however this assumes 4 issues that won’t apply in your particular case.
First, you had been a resident of Canada earlier than 2010. Second, you had been born in 1990 or earlier. Third, you’ve got by no means contributed to a TFSA. Fourth, you’ve got by no means made a withdrawal.
Earlier than including the brand new $7,000 restrict for 2026, the utmost cumulative room by way of 2025 is $102,000. Including the 2026 contribution brings the whole to $109,000. Keep in mind, this is absolutely the ceiling, not what most individuals even have accessible.
The place many buyers run into hassle is monitoring contributions and withdrawals. Whilst you can verify your TFSA room by way of the Canada Income Company (CRA) portal, that quantity will not be up to date in actual time. Even the CRA notes that the determine could also be inaccurate.
This is the reason it helps to maintain your personal easy spreadsheet that information how a lot you contribute, whenever you contribute it, and whenever you make withdrawals. Doing this persistently might help you keep away from overcontributions and sudden penalties.
What to spend money on with a maxed TFSA
Somebody with the complete TFSA room accessible in 2026 would doubtless be born in 1990 or earlier. This investor might be a millennial who could have already got a house, a steady job, and long-term monetary targets that embrace retirement planning.
At this stage, the TFSA usually works finest as a long-term development engine. If I had been on this place, I’d give attention to a low-cost, diversified exchange-traded fund (ETF). One possibility that matches this position effectively is the BMO Progress ETF (TSX:ZGRO).
That is an all-in-one portfolio that holds 80% in international equities and 20% in bonds. The fairness portion offers long-term development, whereas the bond allocation helps scale back volatility throughout market downturns. This steadiness is sensible for somebody who remains to be 30 years away from retirement however desires a smoother journey than an all-equity portfolio.
One other benefit is price. The administration expense ratio (MER) is about 0.20%. On a $100,000 funding, that works out to roughly $200 per yr in charges, which is much decrease than what many Canadians pay by way of conventional financial institution mutual funds.
