How to Use Your TFSA to Double Your Annual Contribution

The Tax-Free Savings Account (TFSA) contribution limit for 2026 is set at $7,000. While most Canadians think of this as a hard ceiling, savvy investors know there’s a way to effectively double that annual contribution — without breaking any rules. The secret lies in building a TFSA that generates growing tax-free income.

Turning your TFSA into a wealth-building machine

At its core, the strategy is simple: grow your TFSA to a point where the income it produces each year equals (or better yet, exceeds) the annual contribution limit. That income — whether from dividends or distributions — can then be reinvested or used to combine with new contributions, eventually doubling or tripling (effectively, multiplying) the impact of your savings.

This strategy strongly rewards those who start early. A Canadian who has been eligible for the TFSA since its inception in 2009 but never contributed would have cumulative room of $109,000 through 2026. 

If that entire amount were invested today, the portfolio would need to generate a yield of just over 6.4% to produce $7,000 in annual tax-free income.

While achievable, the real power comes from consistent contributions and compounding over time. Investors who funded and invested in their TFSA every year likely have portfolios well above $109,000 today, making the income hurdle far easier to clear.

The power of dividend growth inside a TFSA

Dividend growth stocks are particularly effective in this strategy because they provide a rising income stream without triggering any tax consequences inside a TFSA.

A jump-out historical example is goeasy (TSX: GSY). Back in 2009, it was a relatively unknown company trading at a modest price-to-earnings (P/E) ratio of around 11–13. Since then, it has delivered annualized returns of about 20%, turning a $10,000 investment into more than $213,000 — a remarkable 21-bagger.

Today, trading at a P/E of roughly eight — around a 31% discount to its long-term average — the company appears to be compelling. 

goeasy has grown its dividend at an extraordinary 10-year compound rate of 30.7%. At a recent share price near $127, the stock offers a dividend yield of roughly 4.6%.

To put that growth into perspective, investors who bought goeasy in 2016 with a starting yield of about 4% would now be earning a yield on cost of approximately 46%. That level of income inside a TFSA can easily cover — and exceed — the annual contribution limit.

A more conservative path to TFSA income growth

For investors seeking a steadier, more conservative approach, Brookfield Infrastructure Partners L.P. (TSX: BIP.UN) offers a compelling alternative. The company owns a diversified portfolio of global infrastructure assets that generate predictable, inflation-linked cash flows.

BIP targets annual distribution growth of 5–9%, supported by operational expertise and disciplined capital recycling. With the stock currently yielding about 5%, even the low end of its growth target would push an investor’s yield on cost close to 6.4% within five years — enough to generate $7,000 annually on a $109,000 portfolio.

Investor takeaway

Doubling your annual TFSA contribution is about patience, compounding, and smart stock selection. By focusing on solid dividend growth investments, Canadians can build tax-free income streams that could mix in with their TFSA contributions, turning a simple savings account into a powerful wealth-building engine.

The post How to Use Your TFSA to Double Your Annual Contribution appeared first on The Motley Fool Canada.

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More reading

• Your Path to TFSA Millions: 3 Canadian Stocks for Generational Wealth
• 1 Practically Perfect Canadian Stock Down 38% to Buy and Hold Forever
• 3 Top Utility Sector Stocks for Canadian Investors in 2026
• 5 Dividend Stocks to Double Up on Right Now
• 2 Stocks That Could Turn $100,000 Into $1 Million by 2035

Fool contributor Kay Ng has positions in Brookfield Infrastructure Partners and goeasy. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.