How to Use Your TFSA to Double Your Annual Contribution

The Canadian government launched the Tax-Free Savings Account (TFSA) in 2009 to encourage its citizens to save and invest for the long term. The account allows investors to earn tax-free returns—including capital gains, dividend income, and interest—on eligible investments held within their contribution limits. For 2026, the annual TFSA contribution limit is $7,000. Meanwhile, a Canadian who was at least 18 years old in 2009 and has never contributed to a TFSA can accumulate up to $109,000 in contribution room.

One of the TFSA’s key advantages is that any amount withdrawn is added back to the investor’s contribution room on January 1 of the following year. As a result, investors who generate substantial gains within their TFSA can effectively increase the value of their tax-sheltered portfolio. For example, a high-growth stock that doubles in value could significantly boost the account’s overall worth, and any subsequent withdrawal would restore that higher amount as contribution room in the future.

However, this strategy comes with considerable risk. If a stock declines in value, selling it will not only result in a capital loss but will also permanently reduce your TFSA contribution limit. Therefore, investors with higher risk-taking abilities can consider the following two high-growth stocks, which have the potential to generate superior returns over the next 12 months, thereby enhancing investors’ returns and contribution limits.

Celestica

Celestica (TSX:CLS) is a leading electronics manufacturing services (EMS) provider that offers design, engineering, supply chain management, and hardware platform solutions to some of the world’s largest technology companies. Driven by strong financial performance and growing exposure to the rapidly expanding artificial intelligence (AI) market, the stock has generated an exceptional return of more than 2,700% over the past three years at an annualized rate of around 204%.

The accelerating adoption of AI by enterprises, governments, and consumers is driving unprecedented demand for computing power, prompting hyperscalers and cloud service providers to invest significantly in data center infrastructure. This trend is boosting demand for Celestica’s advanced networking and hardware solutions, which are critical for supporting next-generation AI workloads.

At the same time, the company continues to invest in innovation and expand its manufacturing capabilities to strengthen its competitive position. A key initiative is the development of a new manufacturing facility in Fort Worth, Texas, which could enhance Celestica’s ability to serve the fast-growing data centre market and other high-value technology segments.

Given the powerful AI-driven tailwinds, expanding production capacity, and strong execution, Celestica appears well-positioned to sustain its growth momentum and deliver superior returns over the next 12 months.

MDA Space

Another stock that could generate outsized returns over the next 12 months is MDA Space (TSX:MDA), a leading provider of advanced technologies and services spanning the entire space economy. Backed by strong financial growth and an improving outlook, the stock has delivered an impressive total return of 563% over the past three years, representing an annualized gain of approximately 88%.

The company is benefiting from several powerful industry tailwinds. Rising demand for satellite-based connectivity, increasing government spending on national security and defence, and renewed interest in space exploration are fueling rapid growth across the global space sector. Reflecting these trends, the World Economic Forum estimates that the global space economy could expand at an annualized rate of 11% to reach $1.8 trillion by 2035, creating a significant long-term opportunity for MDA Space.

To capitalize on this growth, MDA Space has built a robust development pipeline valued at approximately $40 billion over the next five years, spanning government and commercial customers across multiple business segments. The company is also investing aggressively in its future, with planned capital expenditures of $225 million to $275 million this year to enhance production capacity and advance its chip development initiatives.

These investments are expected to support continued growth, with management forecasting increases in revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of roughly 10% and 7%, respectively. Given its expanding market opportunity, strong backlog, and ongoing investments in innovation and capacity, MDA Space appears well-positioned to maintain its growth trajectory and deliver attractive returns for investors.

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

• 3 of the Best Canadian Stocks for a Buy and Hold in a TFSA
• Here’s the 3-Stock TFSA Strategy I’d Use in 2026
• Should Investors Buy Up SpaceX Stock or This TSX Winner?
• The Canadian Stocks I’d Prioritize If I Had $5,000 to Invest Right Now
• 2 Growth Stocks Set to Skyrocket in 2026 and Beyond

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Celestica and MDA Space. The Motley Fool has a disclosure policy.