Passive Income: How to Make $600 Per Month Tax Free

If you want to create this amount of passive income, there are a few first steps you need to take. But always discuss them with your advisor.

| More on:
money cash dividends

Image source: Getty Images

Today, there’s not going to be any beating around the bush. I’m simply going to tell you the steps and tools you’ll need to create passive income each month, tax free. Lt’s get into it.

Have the right account

If you’re new to investing, you may not be aware of the Tax-Free Savings Account (TFSA). I won’t get into every single detail here, but the TFSA is definitely one of the tools you’ll need to create monthly passive income.

The TFSA currently has a contribution limit of $88,000 after the addition of $6,500 in January. However, that’s only if you were 18 in 2009. So, make sure you know all the details when you open up a TFSA for yourself.

But, of course, the main benefit here is that you can contribute and take out cash within your TFSA at any time, tax free. Once you have this opened, it’s on to the next part: investments.

Create a diverse portfolio of monthly payers

It’s time to get into the details with your financial advisor. Decide how much you can invest on a consistent basis and put that cash aside each paycheque if possible. However, for the purpose of this example I’m going to use a solid example of a monthly passive-income stock.

Slate Grocery REIT (TSX:SGR.UN) provides monthly passive income through the investment in grocery-anchored real estate across the United States. It currently has a stable occupancy rate and continues to grow by investing in these properties.

Furthermore, the company is quite valuable. Shares are down 17% in the last year, despite strong performance. It trades at just 4.66 times earnings as of writing and offers a 8.58% dividend yield as well. Now, let’s look at how you could create $600 per month over time.

Yes, over time

If you were to create $600 per month right away in passive income, it would mean a huge investment. One that would be too much for most of us. But for the sake of argument, let’s look at what that would cost today.


While it’s true this could fit in your TFSA, that’s like putting all your eggs in one basket — something you simply do not want to do. Instead, let’s look at how long it would take if you put $25,000 towards this stock and reinvested your passive income along the way.

YearShares OwnedAnnual Dividend Per ShareAnnual DividendAfter DRIP ValueYear End Shares OwnedYear End Stock PriceNew Balance

There you have it. To achieve $7,200, and therefore $600 per month, in passive income, it would take nine years at that rate. There are many calculators out there that can help you figure out exactly how and where to invest to achieve this your own way. Just always make sure to discuss it with your financial advisor.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

Here Are My Top 5 Dividend Aristocrats to Buy Right Now

Now is the time to buy these top five dividend aristocrats at their two-year low before they recover to 2021…

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

Is NorthWest REIT Stock the Best High-Yield Dividend for You?

NorthWest REIT (TSX:NWH.UN) offers a substantial dividend, but exercise caution with this riskier stock.

Read more »

Dividend Stocks

Income Stocks: A Once-in-a-Decade Chance to Get Rich

These two income stocks are among the best on the TSX for those seeking consistent total returns over a long-term…

Read more »

dividends grow over time
Dividend Stocks

3 Top Royalty Stocks With Dividend Yields of up to 9%

When it comes to secured dividends, these three are top notch. Each offers exposure to royalties through franchising and ultra-high…

Read more »

Golden crown on a red velvet background
Dividend Stocks

This 8 Percent Dividend King Pays Out Every Month

Canoe EIT Income Fund (TSX:EIT.UN) is a staple for monthly income investors.

Read more »

sad concerned deep in thought
Dividend Stocks

Should You Buy Fortis or TC Energy Today?

These stocks have great track records of dividend growth.

Read more »

Dice engraved with the words buy and sell
Dividend Stocks

A&W Stock: Buy, Sell, or Hold?

Shares of A&W (TSX:AW.UN) stock popped by 20% after a major corporate restructuring announcement investors love.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Monthly Paying Dividend Stocks With Handsome 7% Dividend Yields

Given their healthy cash flows and high yields, I am bullish on these three monthly-paying dividend stocks.

Read more »