How to Use a TFSA to Generate $363 in Monthly Tax-Free Income

Passive income planning in a TFSA is easy thanks to this fund’s fixed $0.10 per share monthly payout.

Key Points
  • EIT.UN offers a high monthly payout that can help generate meaningful tax-free income inside a TFSA.
  • The fund uses active management and leverage, which can boost returns but also increase risk and costs.
  • Generating $363 per month currently requires an investment of roughly $62,146 based on today’s distribution rate and market price.

If you’re a younger investor, there’s a good case for focusing your Tax-Free Savings Account (TFSA) on growth investments instead of income. After all, the earlier you start compounding, the more powerful that tax-free growth can become over time.

Still, the cost of living today is hard to ignore. An extra $363 a month in tax-free income could go a long way. Maybe that covers your cellphone bill, utilities, groceries, or even a night out once in a while to decompress after work.

Fortunately, generating that kind of passive income inside a TFSA is fairly realistic today thanks to the Canoe EIT Income Fund (TSX: EIT.UN).

This is not an exchange-traded fund (ETF). Instead, it’s a closed-end fund that currently pays a steady monthly distribution of $0.10 per share. Here’s what you need to know.

ETF is short for exchange traded fund, a popular investment choice for Canadians

Source: Getty Images

What is EIT.UN?

EIT.UN is an actively managed income-focused portfolio that invests primarily in Canadian and U.S. dividend-paying stocks. The fund is managed by Robert Taylor, a CPA and CFA, and currently holds 57 individual securities.

Right now, the portfolio is allocated roughly: 47% Canadian equities, 41% U.S. equities, about 10% cash, and roughly 1.2% international equities. Sector-wise, the fund leans heavily toward financials, energy, and industrial stocks. That tilt has worked out fairly well recently, particularly as energy and industrial companies benefited from inflationary pressures and higher commodity prices.

With distributions reinvested, EIT.UN has delivered an 18.5% annualized return over the last five years, which has beaten the market. Of course, that income stream does not come free. The fund charges a 1.1% management fee, which is notably high.

Investors should also understand that EIT.UN can use leverage. The fund is permitted to borrow up to 120% of its net asset value, which can increase both gains and losses. Borrowing costs can also weigh on returns during periods of higher interest rates.

How much do you need to invest to earn $363 per month?

The math here is fairly simple. EIT.UN currently pays a monthly distribution of $0.10 per share. To generate $363 per month, you need:

363÷0.10=3,630363 \div 0.10 = 3{,}630

You would need to own 3,630 shares of EIT.UN. As of May 14, 2026, EIT.UN traded at $17.12 per share. Multiplying that by 3,630 shares:

3,630×17.12=62,145.603{,}630 \times 17.12 = 62{,}145.60

So, you would need to invest about $62,146 to target roughly $363 in monthly tax-free income inside a TFSA.

There are a few caveats, though. While the distribution has historically been fairly steady, it is not guaranteed and could change depending on market conditions. The share price can also fluctuate significantly over time, especially since the fund uses leverage.

Another detail worth knowing is that EIT.UN currently trades at a slight discount to its net asset value (NAV). The market price is about $17.12, while the underlying NAV sits closer to $17.60. In theory, you’re buying the portfolio for slightly less than the value of its underlying assets. Still, there’s no guarantee that discount ever closes.

Fool contributor Tony Dong 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.

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