What you can actually hold inside a TFSA

Your TFSA doesn't just hold cash - it can hold stocks, ETFs, GICs, and bonds, and none of the growth gets taxed. Most Canadians use it like a savings account. That's not wrong, but it's leaving a lot of room unused.

The CRA calls anything you can hold inside a TFSA a "qualified investment." The list is longer than you'd think. Stocks of Canadian and foreign companies. Government and corporate bonds. Exchange-traded funds. Mutual funds. GICs from banks and credit unions. Even shares of income trusts and real estate investment trusts.

You can't hold everything. No direct real estate - you can't put your house deed in there. No collectibles like art or coins. No private company shares unless they're publicly traded. No cryptocurrency directly, though you can hold a Bitcoin ETF if your bank or broker offers it.

The catch is your financial institution decides what they'll let you hold, not the CRA. Most big banks will let you hold their mutual funds, GICs, and some ETFs. But if you want individual stocks or a wider range of ETFs, you'll need to open your TFSA with a discount brokerage - either the bank's own trading platform or a separate firm like Questrade or Interactive Brokers.

Here's where it gets interesting. A GIC inside your TFSA earning 4% beats a savings account outside your TFSA earning 4%. Same rate, but the TFSA version grows tax-free. At $10,000 earning 4% annually, that's $400 you keep versus $400 minus whatever your marginal tax rate takes.

But growth stocks can do better over time. An ETF tracking the S&P 500 has averaged around 10% annually over decades - with bad years and great years mixed in. In a regular investment account, you'd pay capital gains tax on 50% of any profit when you sell. In a TFSA, you keep it all.

The risk is real though. Stocks can lose money. GICs can't. If you put $10,000 into a stock and it drops to $8,000, you've permanently used up $10,000 of TFSA room for an $8,000 investment. You can't claim the loss against other income like you could in a regular account.

One rule that trips people up: you can't replace investments immediately after selling them. If you sell $5,000 worth of stock in your TFSA, you get that contribution room back - but only on January 1st of the next year. Sell and rebuy the same stock within 30 days and the CRA considers it a "superficial loss" that can trigger penalties.

Most Canadian banks and credit unions offer TFSA accounts. The question is what they'll let you hold in them. A basic TFSA savings account gives you cash and maybe GICs. A self-directed TFSA through a discount brokerage gives you everything the CRA allows.

If you're keeping more than a few thousand in cash for emergencies, the investment room in your TFSA is probably worth using. At $75,000 in Ontario, the tax you'd pay on investment gains outside your TFSA is roughly 23% on capital gains and your full marginal rate on interest and dividends. TaxSplit.ca shows exactly what that rate looks like for your income.

The 2025 TFSA limit is $7,000 - use it for whatever makes sense. Emergency cash, GICs, growth stocks, or all three. Just don't leave the room empty.