Generate $500 in Tax-Free Monthly Income With This Easy Strategy

Passive-income investing is easy thanks to this fund’s steady $0.10-per-share monthly payout.

Tony Dong, MSc, CETF®

Tony turned a series of 2017 marijuana stock losses into a freelance career advocating for ETF investing. He currently holds a Master’s in Risk Management from Columbia University and is a Certified ETF Advisor (CETF®). Tony is the founder of ETF Portfolio Blueprint (etfportfolioblueprint.com) and the Lead ETF Analyst for ETF Central, a partnership between Trackinsight and the NYSE. His analysis has also been featured in publications like Kiplinger, 24/7 Wall St., U.S. News & World Report, TheStreet, and Benzinga. Tony also provides independent content and marketing consulting services to various Canadian and U.S. ETF issuers. His editorial opinions for The Motley Fool remain independent and objective.

Published January 18, 2025 9:30 am EST

Paying taxes sucks, and let’s be honest: Federal government initiatives like the GST holiday don’t exactly make a huge dent in your wallet.

But you know what does? A tax-free $500 paycheque landing in your account every month for doing absolutely nothing. And no, I’m not talking about welfare.

This is about smart, passive-income investing using accounts that are already available to every Canadian. Let’s break down how you can make this happen.

stock research, analyze data — Image source: Getty Images

The account to use

It all starts with the Tax-Free Savings Account (TFSA)—a name I genuinely dislike because it tricks unsuspecting newbies into using it as a plain old savings account.

In reality, the TFSA is way more versatile. You can hold investments like stocks, bonds, exchange-traded funds, and even real estate investment trusts (REITs), making it a powerful tool for building wealth.

There’s a contribution limit that grows each year, and for 2025, it’s $7,000. If you’re unsure how much you can invest, simply log into the Canada Revenue Agency portal, and it will give you your exact room.

Here’s the best part: any gains in this account—whether from capital gains, dividends, or interest—are completely tax-free. That also applies when you withdraw from it. And unlike the U.S. Roth IRA, the TFSA has no restrictions on withdrawals. You can take money out whenever you want without penalties.

The fund to buy

The TSX offers a wide range of monthly-paying assets—some are stocks, others are REITs—but my pick is Canoe EIT Income Fund (TSX:EIT.UN).

This fund features a 50/50 portfolio of Canadian and U.S. stocks, with up to 1.2 times leverage applied to enhance returns. However, the key feature is its reliable income stream.

For over a decade now, EIT.UN has been paying a steady $0.10 per share distribution. Like clockwork, the fund goes ex-distribution on the 14th or 15th of each month, and the payment usually hits your account on the 22nd or so of the following month.

How much to invest?

Assuming EIT.UN’s most recent January monthly distribution of $0.10 and a share price of $15.36 as of writing remained consistent moving forward, an investor using a TFSA would need to buy roughly $76,800 worth of EIT.UN, corresponding to 5,000 shares to receive $500 monthly tax-free.