Picture supply: Getty Photos
Paying taxes sucks, and let’s be sincere: Federal authorities initiatives just like the GST vacation don’t precisely make an enormous dent in your pockets.
However you understand what does? A tax-free $500 paycheque touchdown in your account each month for doing completely nothing. And no, I’m not speaking about welfare.
That is about good, passive-income investing utilizing accounts which might be already obtainable to each Canadian. Let’s break down how one can make this occur.
The account to make use of
All of it begins with the Tax-Free Financial savings Account (TFSA)—a reputation I genuinely dislike as a result of it methods unsuspecting newbies into utilizing it as a plain outdated financial savings account.
In actuality, the TFSA is far more versatile. You possibly can maintain investments like shares, bonds, exchange-traded funds, and even actual property funding trusts (REITs), making it a strong device for constructing wealth.
There’s a contribution restrict that grows annually, and for 2025, it’s $7,000. In case you’re uncertain how a lot you may make investments, merely log into the Canada Income Company portal, and it gives you your actual room.
Right here’s the very best half: any positive aspects on this account—whether or not from capital positive aspects, dividends, or curiosity—are fully tax-free. That additionally applies while you withdraw from it. And in contrast to the U.S. Roth IRA, the TFSA has no restrictions on withdrawals. You possibly can take cash out everytime you need with out penalties.
The fund to purchase
The TSX gives a variety of monthly-paying property—some are shares, others are REITs—however my choose is Canoe EIT Revenue Fund (TSX:EIT.UN).
This fund includes a 50/50 portfolio of Canadian and U.S. shares, with as much as 1.2 occasions leverage utilized to boost returns. Nevertheless, the important thing characteristic is its dependable earnings stream.
For over a decade now, EIT.UN has been paying a gentle $0.10 per share distribution. Like clockwork, the fund goes ex-distribution on the 14th or fifteenth of every month, and the fee normally hits your account on the twenty second or so of the next month.
How a lot to speculate?
Assuming EIT.UN’s most up-to-date January month-to-month distribution of $0.10 and a share worth of $15.36 as of writing remained constant shifting ahead, an investor utilizing a TFSA would want to purchase roughly $76,800 value of EIT.UN, corresponding to five,000 shares to obtain $500 month-to-month tax-free.
