How to Leverage a TFSA to Effectively Double Your Contribution

Doubling your Tax-Free Savings Account (TFSA) contribution doesn’t mean bending the rules — it means building a portfolio that generates an additional $7,000 in annual income or gains to match your yearly limit. With the 2026 TFSA contribution limit at $7,000, the goal is simple in theory: create a tax-free portfolio that could produce another $7,000 on its own.

In practice, that takes discipline, patience, and smart stock selection. But when done right, the compounding inside a TFSA can quietly turn steady contributions into serious long-term wealth.

The math behind doubling your TFSA

Let’s start with some numbers.

If your portfolio yielded 4%, you would need about $175,000 invested to generate $7,000 in annual income. That income — sheltered from taxes — effectively “doubles” your yearly contribution without adding new capital from your pocket.

But yield alone isn’t enough.

Chasing big dividend yields can backfire if payouts aren’t sustainable. Instead, focus on companies offering solid yields combined with consistent dividend growth. Over time, dividend increases compound, pushing your income higher without requiring additional contributions.

Equally important is diversification. A basket of businesses across banking, insurance, energy, utilities, infrastructure, technology, and asset management reduces risk while keeping income resilient during market volatility. Look for the following:

• Sustainable payout ratios
• Durable earnings growth
• Strong balance sheets
• Proven histories of dividend increases

That combination allows income to grow year after year — the true engine behind doubling contributions.

High-quality dividend growth in action

One compelling example is Brookfield Asset Management (TSX:BAM).

BAM operates as a global alternative asset manager with over US$1 trillion in assets under management, including more than US$600 billion in fee-bearing capital. Its business model is built around managing long-term institutional capital, generating highly recurring, contractual fee revenues. That structure produces stable and predictable cash flows across economic cycles.

The company has delivered double-digit growth historically and just raised its dividend by 14.9% this month. With a yield close to 4% at recent prices and a long runway tied to growing global demand for private infrastructure, renewables, credit, and real assets, BAM offers both income and growth — a powerful combination inside a TFSA.

Another interesting candidate is FirstService (TSX:FSV).

Despite its dividend yield being small (around 0.8%), FirstService has declined significantly from recent highs, creating a potential opportunity. The company provides residential property management and property restoration services — businesses characterized by recurring revenue, high customer retention, and defensive demand.

FirstService grows through disciplined acquisitions in a fragmented industry, steadily expanding earnings and cash flow. While its yield won’t generate immediate income like a 4% payer, long-term capital appreciation can meaningfully boost TFSA value. A 10% annual return on $70,000, for example, would equate to $7,000 in gains — though capital appreciation is typically less predictable than dividend income.

Build, review, repeat

Successfully doubling your TFSA contribution requires ongoing attention. Review holdings at least annually. Re-balance when necessary. Add on market pullbacks rather than during euphoric rallies.

The strategy isn’t about speculation — it’s about combining dependable dividend growers with selective long-term compounders. Over time, rising income and capital appreciation can produce a snowball effect, where returns generate more returns, entirely tax-free.

Investor takeaway

Doubling your TFSA contribution is achievable by building a diversified portfolio of sustainable dividend growers and long-term compounders. A 4% yield on $175,000 can generate $7,000 annually, effectively matching the yearly limit. 

Companies like Brookfield Asset Management offer recurring cash flows, dividend growth, and long-term growth potential, while FirstService provides long-term capital appreciation potential. By focusing on quality, sustainability, and disciplined portfolio maintenance, investors can turn their TFSA into a powerful tax-free wealth-building machine.

The post How to Leverage a TFSA to Effectively Double Your Contribution appeared first on The Motley Fool Canada.

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More reading

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• Build a Cash-Gushing Passive Income Portfolio With Just $15,000

Fool contributor Kay Ng has positions in Brookfield Asset Management and FirstService. The Motley Fool recommends Brookfield Asset Management and FirstService. The Motley Fool has a disclosure policy.