The federal government introduced the Tax-Free Savings Account (TFSA) program in 2009. One difference between this investment account and the Registered Retirement Savings Plan (RRSP) is that it has no income requirement. Canadians 18 years old and above with a valid social insurance number (SIN) can open a TFSA and contribute for life.
TFSA users are encouraged to save and invest to benefit from the tax-free money growth and income features. The long-term objective is to have enough to live comfortably in retirement. However, there’s a golden rule for account holders to follow.
The Canada Revenue Agency (CRA) sets annual limits every November. All users should refrain from over-contributing. The penalty for the infraction is 1% of the overcontribution, although the recourse is to withdraw the amount immediately. For 2024, the annual contribution limit is $7,000. You can use your TFSA to earn a specific tax-free income every month.
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Monthly income stock
The ideal approach to meet your financial target sooner rather than later is to max out the yearly TFSA contribution limits, if finances allow. All interest, gains, and income, as well as withdrawals, are tax-exempt. Your second step is to pick dividend stocks with monthly payouts to simplify the process. Moreover, your TFSA balance can compound faster if you reinvest dividends 12 times a year, not the usual 4.
Let’s assume the goal is to make $300 per month in tax-free income. Canadian real estate investment trusts (REITs) are top-of-mind choices because of high yields and monthly dividends. You can choose from various real estate sectors. However, Crombie (TSX: CRR.UN) is my number one choice.
The REIT trades at $15.04 per share and pays a hefty 5.9% dividend. Given the price and yield, you can buy 465 shares ($6,993.60) for your TFSA. The table below shows the potential income per year. If you religiously contribute the same amount, you could be producing $300 in tax-free monthly income after nine years.
| Company | Recent Price | No. of Shares | Div / Share | Payout (1 year) | Frequency |
| Crombie | $15.04 | 465 | $0.89 | $413.85 | Monthly |
National leader
Crombie has been developing commercial, retail, and residential properties for 59 years. Today, this $2.8 billion REIT owns and operates high-quality grocery and pharmacy-anchored shopping centres, freestanding stores, and mixed-use developments (a total of 295 properties under management). Its strategic partner is a top Canadian conglomerate.
Iconic food retailer Empire Company Limited has a 41.5% stake in Crombie. Its President and CEO, Mark Holly, said, “Crombie has achieved many milestones over the past decade to evolve into the national leading REIT it is today.”
In the first half of 2024, property revenue and net property income increased 4.3% and 6% year-over-year to $235 million and $148.5 million. At the end of Q2 2024, the committed occupancy is 96.4%.
“Our future remains strong as we continue to deliver on Crombie’s successful strategy of building and owning quality real estate that enhances local communities and generates long-term growth,” Holly added.
TFSA power
Canadians can’t underestimate the power of the TFSA. The annual contributions appear small but regular contributions can help build a substantial passive income stream.
