One of the biggest advantages of using a Tax-Free Savings Account (TFSA) is how simple it makes investing. Generally, you do not need to worry about the tax treatment of your income. It does not matter whether your returns come from dividends, capital gains, interest income, or even return of capital.
If your goal is to generate a steady stream of passive income, there is no need to adjust for taxes or think about gross versus net yields. What you see is what you get. So, if you are aiming for something like $500 a month in tax-free income, how would you go about it?
One option that makes the math especially straightforward is the Canoe EIT Income Fund (TSX: EIT.UN), thanks to its fixed monthly distribution of $0.10 per share.
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What is Canoe EIT Income Fund?
EIT.UN is not an exchange-traded fund (ETF). It is a closed-end fund. That means it does not continuously issue or redeem shares like an ETF. Instead, it has a fixed pool of capital, and shares trade on the market based on supply and demand.
Because of this structure, the fund can trade at either a premium or a discount to its net asset value (NAV). As of April 6, 2026, the fund trades at $16.63 per unit, which is a slight discount to its NAV of $16.87.
The portfolio itself is actively managed by Rob Taylor. It holds a concentrated mix of roughly 50% Canadian equities and 50% U.S. equities, with a focus on large, established companies.
Currently, the fund holds 56 stocks with an average market capitalization of about $128 billion and trades at a price-to-earnings ratio of 21.6 times.
Another important feature is leverage. The fund can borrow up to 20% of its NAV to enhance returns and income. While this can boost distributions, it also increases risk during market downturns.
As for costs the fund charges a 1.1% management fee, which is high, but typical for an actively managed strategy. With distributions reinvested net of fees but before taxes, EIT.UN has returned an annualized 14.5% over the trailing 10-year period.
How much do you need to invest to get $500 a month?
Remember, EIT.UN pays a fixed monthly distribution of $0.10 per unit.
To generate $500 per month, you simply divide your target income by the monthly payout: $500 ÷ $0.10 = 5,000 units
Now multiply that by the current unit price of $16.63: 5,000 × $16.63 = $83,150
So, you would need to invest approximately $83,150 in EIT.UN to generate $500 per month in tax-free income inside a TFSA.
Remember, distributions are not guaranteed. While the fund has a long track record, a bear market could result in a cut, and your principal can fluctuate up or down. TFSA income is completely tax-free, making it easier to plan around fixed monthly cash flow targets.
