Use a TFSA to Make $800 in Monthly Tax-Free Income

Learn how a TFSA can enhance your dividend stock investments by providing tax-free payouts for Canadian dividends.

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Key Points
  • Utilizing TFSA for Tax-Free Dividend Income: Investing in Canadian dividend stocks like CT REIT and Freehold Properties within a TFSA enables tax-free income, with CT REIT offering stable growth linked to Canadian Tire and Freehold benefiting from royalties in high-value oil reserves.
  • Strategic Planning for Targeted Monthly Income: Building a $800 monthly income through TFSA involves strategic allocation in dividend stocks by calculating necessary share quantities against dividend payouts, enabling structured investment toward achieving consistent passive income goals.

Dividend stocks have become increasingly popular as they make stock market returns somewhat predictable. They are a good source of securing a monthly income that can grow with inflation and is in sync with the economic reality. A Tax-Free Savings Account (TFSA) makes the dividend stocks even more lucrative by making their payouts tax-free.

the word REIT is an acronym for real estate investment trust

Source: Getty Images

How to invest in dividend stocks using a TFSA

TFSA allows you to collect only Canadian dividends tax-free. If you invest in US stocks that pay dividends, those dividends are subject to withholding tax. While the US-Canada tax treaty reduces the withholding tax rate to 15% from the statutory 30%, even a TFSA dividend stock has to pay the 15% tax.

Thus, when investing in dividend stocks in a TFSA, consider Canadian stocks and those with higher yields or stronger dividend growth.

Two TFSA dividend stocks for monthly tax-free income

CT REIT

CT REIT (TSX: CRT.UN) is a great monthly dividend stock for a TFSA. The REIT offers a 5.3% dividend yield, a monthly payout, and you can be assured of inflation-adjusted dividend growth. CT REIT has been growing its dividend at an average annual rate of 3% every July since its initial public offering in 2014. Even for July  2026, CT REIT CEO Kevin Salsberg has announced 3.5% dividend growth to $0.982.

The moat behind investing in CT REIT is that more than 90% of its rental income comes from the parent Canadian Tire. Since CT REIT is a subsidiary, it doesn’t need to market its places, hire a broker, or recycle its portfolio like other REITs. Canadian Tire knows it needs this store, and it gives CT REIT the first right of refusal. If the REIT has the bandwidth to buy, intensify, or develop the store, it will take up the property.

If CT REIT loses this moat, its attractiveness as a dividend stock will vanish. It can lose this moat if there is a regulatory change or Canadian Tire downsizes. Thankfully, CT REIT’s moat is intact and running strong, making it a TFSA dividend stock.

Freehold Properties

“Never put all your eggs in one basket” is a proverb that goes well in investing. And when we say basket, diversify beyond a single stock and a single sector. Invest in at least two to three stocks that are not affected by similar factors.

Freehold Properties (TSX: FRU) acquires oil reserves and gives them to oil companies to drill in return for a royalty. The royalty payment is a percentage of the total value of the production. Thus, a surge in oil prices and volume production drives royalty revenue. Freehold’s biggest moat is its reserves in the Permian basin that earn it a premium.

In the first quarter of 2026, oil prices surged significantly due to the US-Iran war. However, royalty revenue fell as continuing supply disruptions through the Strait of Hormuz slowed drilling operations. Notably, Freehold has no operational risk. It is using this time to buy back shares and reduce dividend payments as a percentage of free cash flow.

Nevertheless, Freehold could be a good dividend payer for a few more years as long as oil exports through the Gulf Coast continue.

How to plan for a $800 monthly tax-free income

Planning a passive income is like solving a formula. Suppose you want to earn $800 per month in TFSA income, you need $9,600 in annual dividends. You identify two stocks, CT REIT and Freehold Royalties, to earn $4,800 each in annual passive income.

Divide your passive income goal by the dividend per share to know how many shares you need to own that dividend. I divided $4,800 with the CT REIT dividend per unit. ($4,800 / $0.98). You need 407 shares of CT REIT to earn $4,800 in annual dividends.

You can either buy 407 CT REIT units in one go or make small investments throughout the year.

StockAverage stock price in MayDividend per shareNumber of shares bought from $5,000Total investmentTotal d dividend amount
CRT.UN$17.79$0.984,888$86,957.23$4,800.00
FRU$17.20$1.084,444$76,444.44$4,800.00
Total$163,401.67$9,600.00

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Freehold Royalties. The Motley Fool has a disclosure policy.

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