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

High monthly tax-free income can certainly happen in a Tax-Free Savings Account (TFSA). The account removes the tax drag that normally slows compounding. If you build a portfolio that throws off steady cash and you reinvest it, the snowball gets bigger without the Canada Revenue Agency (CRA) taking a bite along the way. The trick is scale and realism. A target like $800 per month sounds huge, but it becomes math you can plan around once you know the payout rate and you accept that higher yield usually comes with higher moving parts.

EIT

Canoe EIT Income Fund (TSX:EIT.UN) is a closed-end investment fund that aims to pay a steady monthly distribution while also growing its net asset value over time. It doesn’t run one business like a bank or a telecom. It holds a diversified portfolio of securities and uses active management to try to generate income and gains. That structure matters because your “monthly income” comes from the fund’s distribution policy, not from one company’s quarterly profits.

The headline news over the last year has stayed very income-investor friendly: the fund kept its monthly distribution at $0.10 per unit, including the recently announced February 2026 payout. It also announced a special non-cash distribution for unit-holders of record on Dec. 31, 2025. It stated this was as a way to distribute residual net realized capital gains and net income not previously distributed, then reinvest and immediately consolidate units so there is no physical cash payment.

More recently, it also announced a $300 million issuance of Series 3 preferred units in a privately negotiated transaction, with closing expected in early February 2026, and it said it intended to use proceeds in line with the fund’s objectives and strategies. That kind of move can matter as it changes the fund’s capital stack, financing costs, and flexibility, even if the monthly cheque stays the same.

The numbers

The yield story looks attractive on the surface and it explains why EIT.UN gets so much attention in TFSA season. The annual dividend yield sits around 7.1% with the monthly frequency at $1.20 annually. Just remember that “monthly payout” is not a fixed law of nature here. The distribution can change, and your personal yield changes every day with the unit price. Still, here’s how much investors would need to put in for $800 monthly, right away.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTEIT.UN$17.008000$1.20$9,600Monthly$136,000

Here is the part most people skip, and it is the part you cannot skip if you want to hold this for monthly income. The fund openly states that monthly distributions may include return of capital, which means some of what you receive can be your own money coming back to you rather than pure income earned in the portfolio.

It also warns that return of capital that is not reinvested can reduce the fund’s net asset value and could reduce future income generation. That does not make the fund “bad.” It simply means you should judge it by total return, the net asset value (NAV) trend, and distribution sustainability, not just the comforting feeling of a monthly deposit.

Bottom line

So could this be a buy for someone chasing monthly tax-free income? It could, if the investor wants a one-ticket solution that targets a steady monthly distribution, understands the closed-end fund structure, and feels comfortable monitoring whether the payout stays supported through different markets. It could also be a “no” for anyone who wants simple dividend purity, as the fund’s own disclosures make it clear that return of capital can play a role and that matters if your goal is durable, self-funding income.

The post Use a TFSA to Make $800 in Monthly Tax-Free Income appeared first on The Motley Fool Canada.

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More reading

• Use a TFSA to Make $500 in Monthly Tax-Free Income
• Retirement Planning: How to Generate $2,000 in Monthly Income
• Use a TFSA to Earn $500 a Month With No Tax
• A 7% Yield? Here’s the Question TFSA Investors Must Ask
• The Ideal TFSA Stock: A 7.5% Yield Paying Constant Cash

Fool contributor Amy Legate-Wolfe 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.