Ways to generate passive income after which CRA will not come
The Canada Revenue Agency (CRA) has provided several benefits to Canadians affected by the pandemic. The government also commissioned the agency to provide income support for Canadians who have lost income due to the pandemic through programs such as Canada Emergency Benefit (CERB) and Canada Recovery Benefit (CRB).
These exemptions continue to benefit the millions of Canadians affected by the quarantine, but recipients will have to face taxes on these exemptions when tax season hits. There are ways to generate passive income that cannot be used by the CRA.
Use your TFSA
On a Tax Free Savings Account (TFSA), it appears right in the name. When it comes to earning tax-free passive income, there is nothing better than the TFSA. Investing in stocks like Canadian Utilities (TSX: CU) and keeping them in your TFSA can allow you to generate tax-free passive income in your account, which continues to grow.
Canadian Utilities is a dividend aristocrat who annually increases payments to shareholders. It is one of the largest utility companies in Canada and has a 48-year dividend increase. CU has a low-risk business model that delivers reliable, predictable, and secure cash flows that the company can use to fund its growing dividend payments.
Most of the revenue comes through regulated and long-term contractual agreements. Since it only provides basic services, CU can be a recession-resistant stock you can rely on.
Invest in real estate
Another way to generate passive income that the CRA cannot tax is by investing in real estate through real estate investment funds (REITs). It is a safer way to invest in real estate without having to buy real estate or solve all the problems. REITs such as the Northwest Healthcare Properties REIT (TSX: NWH.UN) are listed on TSX as stocks.
Buying REIT shares and holding them in your TFSA can enable you to generate REIT income without being an active landlord. Housing REITs may not be an ideal segment to consider as the housing market is on the brink of collapse. Northwest is a defensive REIT in these circumstances because its tenants are primarily healthcare providers in Canada and Europe.
The Northwest real estate portfolio can generate strong cash flows regardless of the economic situation. Rental collection rates and occupancy rates remain high, with over 80% of tenants using government funding. In addition, the majority of Northwest clients are inflation-indexed and have long-term contracts for an average of 15 years.
The sustainable business model of the Northwest is enhanced by geographic expansion and active acquisitions. It can significantly increase your account balance through reliable dividend payments in your TFSA.
Both methods of generating passive income that the CRA cannot tax require using your TFSA. Make sure you keep track of the available TFSA dues room. With the 2021 update, Canadian TFSA users have an additional $ 6,000 contribution room.
If you are looking to build a passive income portfolio, you may want to consider dedicating a portion of your contribution to income-generating assets such as Canadian Utilities and Northwest Healthcare Properties.