How to earn a TFSA paycheck every month and not have to pay taxes on it

Many Canadians still treat the Tax Free Savings Account (TFSA) as a glorified bank account. If I were running the CRA, I would first name it “Tax-Free Income Account,” because the real power of a TFSA is its ability to generate completely tax-free cash flow month after month, with no impact on your benefits or tax bracket.

For retirees, this avoids the chargebacks associated with withdrawals from other accounts, and for younger investors, it creates a compounding machine with no tax burden. If you want to adopt this mindset early, one option stands out: the Kano EIT Income Fund (TSX:EIT.UN) in a TFSA, you can pay like clockwork every month, completely tax-free. Here’s how it works.

What is EIT.UN

EIT.UN is a closed-end fund, meaning it has a fixed number of units and does not create or redeem shares daily like an exchange-traded fund does. This structure means that the fund can trade at a premium or discount to its net asset value, depending on investor demand. Right now, units are trading slightly below NAV, essentially allowing buyers to pick up the underlying portfolio for a small bargain.

The portfolio contains approximately 40 Canadian and US stocks, generally approximately 50/50 split, and is managed by an active management team. The fund can also use leverage of up to 1.2 times, allowing it to boost returns by borrowing modestly against its assets. However, it is not the cheapest fund out there, with a management fee of 1.1%.

EIT.UN dividends

The fund’s hallmark is its fixed, long-standing monthly distribution of $0.10 per unit, which is unusually predictable in today’s market. To receive the next payout, you must own units before and until the ex-dividend date, usually around the 20th of each month, with payment made on the 15th of the following month.

The distribution is a mix of capital gains, capital return and dividends, which can become complicated in a non-registered account. This is why holding it in a TFSA is the simplest approach: everything is tax-free and you never have to sort out the types of income. Each unit you own generates the same reliable $0.10 every month, which you can reinvest for compounding or withdraw as fixed income.

The silly takeaway

If you are a younger investor, EIT.UN may not be the perfect long-term compounding vehicle, even though its reinvested distribution track record is surprisingly solid. But if you’re older, there’s nothing wrong with switching gears and setting up your wallet to pay you reliably.

A few hundred dollars a month, completely tax-free within a TFSA, can significantly improve your quality of life. There is no trophy for dying with the largest account balance. Life is unpredictable, so put your money to work now and enjoy the comfort and stability you’ve earned.