How to Use Your TFSA to Earn $700 per Month in Tax-Free Income

Creating passive income inside a Tax-Free Savings Account (TFSA) is a great idea to earn monthly income. It gives you money that works for you without adding stress or extra hours to your day. The best part is that every dollar you earn grows completely tax-free. Whether you’re saving for retirement, covering monthly bills, or just wanting more financial breathing room, passive income inside a TFSA compounds faster as you never lose any of it to taxes. Over time, those small, steady payments can turn into a reliable income stream that feels like a bonus paycheque, helping you build wealth quietly in the background while you focus on your life, family, or career.

Getting started

So how do you get started with earning monthly tax-free income. It’s much easier than most people expect. The first step is opening or using your existing TFSA, which allows all investment gains to accumulate and be withdrawn completely tax-free. Once the account is ready, decide how much monthly income you want to build toward, whether that’s $50, $200, or eventually $1,000 a month. From there, focus on choosing monthly dividend stocks or exchange traded funds (ETF) that offer reliable payouts – ones that operate in stable, essential sectors like real estate, utilities, or infrastructure. The key is consistency. Investing even small amounts regularly and reinvesting your early dividends accelerates compounding and brings your income goal closer faster.

The next step is building a diversified base of income-producing investments. Many Canadians start with one or two monthly payers, then expand into utilities or dividend-growth stocks for balance. Look for companies with strong cash flow, high occupancy or long-term contracts, and a sustainable payout ratio. These qualities help ensure the monthly distribution stays stable even through market volatility. It’s also wise to avoid chasing the highest yield. Instead, choose quality first, then build yield through time and compounding.

Finally, automate everything you can. Set up monthly contributions into your TFSA and consider using dividend reinvestment programs (DRIPs) on select stocks so your income buys more income automatically. As your balance grows, your monthly payouts grow with it. And because it’s all inside a TFSA, none of it is taxed or clawed back from government benefits. With patience, steady contributions, and the right mix of reliable monthly payers, your TFSA can become a dependable source of tax-free income that supports you now and into retirement.

Consider APR

Automotive Properties REIT (TSX:APR.UN) is a niche Canadian real estate investment trust (REIT) that specializes in owning and leasing dealership properties across the country. Its entire business is built on long-term, triple-net leases with major auto groups. This means tenants cover most property expenses while APR.UN earns predictable rental income. With dealerships requiring large, well-located spaces and typically signing multi-year agreements, the REIT enjoys stable occupancy, low turnover, and consistent cash flow. This makes APR.UN one of the more overlooked but dependable income-producing REITs on the TSX.

In its most recent earnings, APR.UN reported steady rental revenue and maintained high occupancy, supported by the essential nature of auto-dealership real estate and long-term lease agreements. Funds from operations (FFO) remained consistent, giving the REIT confidence to maintain its monthly distribution. Despite broader real estate market pressures, APR.UN’s earnings stability shows how insulated its portfolio is from rate volatility or changing consumer behaviour. Dealerships continue operating and paying rent regardless of economic cycles.

But above all, APR.UN is a compelling dividend stock for monthly, tax-free income inside a TFSA. It offers a strong, reliable yield supported by predictable tenant agreements and low operating costs. The REIT’s triple-net lease structure keeps expenses minimal, while long-term contracts lock in steady cash flow. It’s exactly what income investors want when building monthly payouts.

Bottom line

APR’s business model is defensive, its tenant base is stable, and its payout has remained consistent through challenging economic environments. This makes it ideal for long-term, monthly dividends. In fact, here’s how to create that $700 per month.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTAPR.UN$10.9910,370$0.81$8,397.00Monthly$113,946.30

For Canadians seeking simple, low-volatility, every-30-days income, APR.UN is an underrated but highly effective choice.

The post How to Use Your TFSA to Earn $700 per Month in Tax-Free Income appeared first on The Motley Fool Canada.

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More reading

• The Best 5 Canadian Dividend Stocks That Belong in Everyone’s Portfolio

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Automotive Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.