Skip to main content
Book a free consultation

Personal tax

Tax on interest income in Canada: how it’s taxed and reported

Interest is one of the simplest kinds of investment income to earn and one of the easiest to under-report. It is added to the rest of your income, it can be taxable before you receive a cent, and the slip that arrives in February may not tell the whole story. This article explains how interest is taxed, when to report it, and the situations that catch people out.

Sora Accounting & Tax · General information · Editorial policy
Updated · 5 min read

Interest is reported as it is earned, not when it is paid

A timeline showing a GIC earning interest each year, with that interest reported annually on the tax return before the investment matures.

Visual labels: Invest; Interest accrues each year; Report on return; Maturity.

See the sourced 2026 Ontario tax guide: rates, limits and deadlines →

What to take away

  • Interest is part of your total income and is reported even when you receive no slip.
  • Interest on a multi-year GIC is generally reported each year as it is earned, not only at maturity.
  • Substantial interest can create a tax balance that makes instalments worth checking.

How interest income is taxed

The CRA treats interest and other investment income as part of your total income, which means it is reported on your return and taxed together with your employment, business or pension income. There is no separate, lower rate for interest. It is taxed at your marginal rates, and the federal and Ontario brackets both apply.

For 2026 the federal rate is 14% on the first $58,523 of taxable income and 20.5% on the next slice up to $117,045. Ontario’s rate is 5.05% up to $53,891 and 9.15% up to $107,785. Which slice your next dollar of interest lands in depends on your other income, so the same $2,000 of interest costs different people different amounts.

What counts as interest

The obvious sources are savings and chequing account interest, term deposits and guaranteed investment certificates. The CRA’s line 12100 page also lists treasury bills, Canada savings bonds, earnings on certain life insurance policies and foreign interest. When a treasury bill matures, the difference between the price you paid and the proceeds shown on your T5008 slip or statement is reported as interest.

Interest the CRA pays you on an income tax refund is also reportable, in the year you receive it. People often miss this one because it is small and arrives on a notice of assessment rather than a bank slip.

When to report it: the GIC timing trap

Interest on a term deposit or GIC usually builds up over more than one year and may only be paid at maturity. That does not mean you wait until then to report it. For most investments, you report the interest earned in each complete investment year, even if you received no slip for that year.

The CRA gives an example: an investment made on July 1, 2024 is reported up to June 30, 2025 on the 2025 return, and the following twelve months go on the 2026 return. If your agreement pays a different rate each year, report the amount on your T5, which can differ from the contract, and ask the issuer how it was worked out.

Slips, and why a missing slip changes nothing

Interest is usually reported on a T5 statement of investment income. Some interest arrives on a T3 or T5013 instead. Institutions are generally required to issue T5 slips by the last day of February following the year, so keep an eye on your online banking and mail.

You may not receive a T5 when the total is under $50, but you must still report the income. The practical fix is to keep your own year-end statements for every account that paid interest, and to compare them with the slips before you file. For a broader tour of slips, see our article on reporting investment income.

Joint accounts, children’s accounts and foreign interest

With a joint account, you generally report your share of the interest based on how much you contributed to the account, not an automatic 50-50 split. Agree on this with the other holder at the start of the year and write down the contributions so both returns tell the same story.

Money invested in a child’s name is generally still your income to report. The exception the CRA notes is Canada child benefit payments deposited into an account in the child’s name, where the interest earned on those payments belongs on the child’s return. Foreign interest is reported in Canadian dollars, usually using the Bank of Canada rate on the day the amount arises. Report the gross amount and claim any foreign tax credit separately rather than subtracting the foreign tax. If you hold foreign property, ask whether a separate reporting form such as the T1135 applies.

An illustration with round numbers

Suppose you hold $50,000 in a savings account and a GIC that together earn $2,000 of interest in 2026. These figures are illustrative only. If your income puts the next dollar in the 14% federal and 5.05% Ontario brackets, the combined rate is 19.05% and the tax on that interest is about $381. If it falls where the 20.5% and 9.15% rates both apply, the combined rate is 29.65% and the tax is about $593.

Other items, such as other provincial amounts and reductions to income-tested benefits, can make the real figure higher. The point is that the after-tax return on interest is lower than the advertised rate, and the gap grows with your income.

Interest, instalments and the TFSA

The CRA lists rental and investment income among the reasons you may need to pay income tax by instalments. In general, if your net tax owing is more than $3,000 in 2026 and was more than $3,000 in 2025 or 2024, instalments are required. The fourth personal instalment date for 2026 is December 15. Our article on whether you need to pay tax instalments explains the options.

Interest earned inside a TFSA is not reported on your return, and withdrawals are tax-free as long as there are no excess amounts, non-resident contributions or non-permitted investments in the account. The 2026 annual dollar limit is $7,000, but your own room depends on your history. If you over-contribute, see our article on fixing a TFSA over-contribution. Separately, interest you pay on money borrowed to earn investment income such as interest and dividends can generally be claimed as a carrying charge, but not when the investment can only produce capital gains.

What to bring to your accountant

Bring every T5, T3 and T5013, plus year-end statements for any account without a slip. Add GIC certificates showing issue dates and terms, your notice of assessment showing any refund interest, and a note of who contributed to each joint account. If you hold foreign accounts, bring the statements and the exchange rates used.

Ask your accountant whether instalments are needed, whether a different mix of accounts would change your tax, and how interest you earn through a corporation differs from the personal rules described here. Our passive investments article covers the corporate side.

Sources & editorial notes

Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.

Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.