For Canadian investors seeking a reliable stream of income from their Tax-Free Savings Account (TFSA), it’s possible to build a portfolio that produces consistent tax-free earnings — without worrying about taxes eroding returns. Because all interest, dividends, and capital gains generated inside a TFSA are fully tax-free, income that comes from investments in this account can be withdrawn without any tax consequences. This makes the TFSA a powerful tool for producing passive income, especially for those planning for retirement or supplementing existing income.

As of 2026, the annual TFSA contribution limit is $7,000, and for individuals who have been eligible since the account’s introduction, the total lifetime contribution space can reach significant levels. Maximizing your TFSA room gives you more capacity to hold high-income investments that generate tax-free cash flow over time.

One simple way to start building your income stream is by combining guaranteed investment certificates (GICs) with dividend-paying stocks. GICs provide fixed interest income while protecting your initial capital, provided you stay within deposit insurance limits. Although current GIC rates are lower than in recent years, they can still offer yields above inflation in some terms, creating a stable foundation for income.

Dividend-paying stocks can add higher yields and growth potential to your TFSA portfolio. Companies that pay regular dividends often offer yields that surpass typical GIC returns, and successful dividend growers may increase payouts over time, boosting your income even further. However, shares can fall in value, and dividends are not guaranteed, so selecting companies with strong financials and reliable payout histories is crucial.

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For example, established Canadian companies in energy infrastructure and other sectors are known for long dividend streaks and attractive yields, helping income investors build predictable cash flow. With a diversified mix of income-oriented holdings, many investors can target an average return of around 4% or more on their total TFSA balance.

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On a fully maximized TFSA — potentially over $100,000 in contribution room — a 4% average return can translate into roughly $4,360 of annual income, or about $363 per month in tax-free earnings. By carefully choosing investments for yield and sustainability, Canadians can use their TFSA to generate meaningful passive income without giving up the tax advantages the account provides.