How to Structure a TFSA to Bring In $500 a Month — Completely Tax-Free

Passive income math trips up a lot of investors. The usual approach is to take a yield figure, whether that is a trailing 12-month yield or a forward estimate, and multiply it by your portfolio value to “eyeball” how much income you will get.

The problem is that this is not very precise. Yields fluctuate, distributions change, and depending on how they are calculated, they may not reflect what you are actually receiving today.

A better way is to work backwards. Start with the most recent distribution per share, figure out how many shares you need to hit your target income, and then calculate how much capital that requires.

This process becomes even simpler inside a Tax-Free Savings Account (TFSA). Since there is no tax drag, you do not need to adjust for after-tax income. What you see is what you get.

Here is how that math works using one of my favourite Canadian income funds, the Canoe EIT Income Fund (TSX: EIT.UN).

Start with the income target

If your goal is $500 per month, the first step is to look at the most recent distribution. EIT.UN currently pays a fixed monthly distribution of $0.10 per share.

Now work backwards: $500 ÷ $0.10 = 5,000 shares. That is the number of shares required to generate $500 in monthly income.

Next, multiply that by the current market price. As of April 6, 2026, the fund trades at $16.63 per share: 5,000 × $16.63 = $83,150

So, you would need approximately $83,150 invested to generate $500 per month in tax-free income inside a TFSA.

This approach is much more reliable than relying on a yield percentage, because it is based on the actual cash payout you receive.

How Canoe EIT Income Fund works

EIT.UN is structured as a closed-end fund rather than an exchange-traded fund (ETF). It does not continuously issue or redeem units. Instead, a fixed number of units trade on the market, which means the price can move above or below the underlying net asset value.

As of April 6, 2026, the fund trades at $16.63 per unit compared to a net asset value of $16.87, representing a slight discount. It’s best to always buy at a discount, and never at a premium.

The portfolio is actively managed and holds a concentrated mix of Canadian and U.S. equities, roughly split 50/50. The focus is on large, established companies with durable earnings.

The fund can also use leverage, borrowing up to 20% of its net asset value. This can enhance income and returns but also increases risk during market downturns.

Finally, fees are also higher than a typical index ETF, with a 1.1% base management fee, reflecting its active approach.

The post How to Structure a TFSA to Bring In $500 a Month — Completely Tax-Free appeared first on The Motley Fool Canada.

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More reading

• How to Use a TFSA to Bring in $500 a Month — Completely Tax-Free
• Use a TFSA to Make $500 in Monthly Tax-Free Income
• Retirement Planning: How to Generate $2,000 in Monthly Income

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.