Is Savings Account Interest Taxable in Canada? (2026)

A savings account paying 2.75% isn’t really paying you 2.75%. Nothing comes off the interest before it lands in your account, the way tax comes off a paycheque, so the full amount arrives and looks like yours to keep. You settle up months later, at whatever rate applies to your last dollar of income.

Plenty of people also believe small amounts don’t count, that anything under $50 is the CRA’s version of pocket change. That one has a clear answer, and it’s sitting on the CRA’s own page.

Is savings account interest taxable in Canada?

Yes. Interest from a savings account is fully taxable in the year it’s paid or credited to you, unless the account sits inside a TFSA, RRSP, FHSA or another registered plan. You report it on line 12100 (opens in a new tab) of your return, and it’s taxed at your marginal rate, exactly like an extra dollar of salary. There’s no minimum and no exempt amount.

Canada gives you no tax-free savings allowance

This is where Canada is stricter than people assume. A basic-rate taxpayer in the UK gets a Personal Savings Allowance (opens in a new tab) of £1,000 of interest a year before any tax applies, £500 at the higher rate. Canada has no equivalent. Your first dollar of interest in a non-registered account is taxed at the same rate as your thousandth.

What we have instead is the TFSA, which shelters the interest completely rather than exempting a slice of it. That’s the better deal for most savers, but only for money you actually move into one.

How much tax will you pay on savings interest?

Your marginal rate, which depends on your income and your province. Once your taxable income passes $58,523 you’re into the 20.5% federal bracket, and the combined rate on interest lands between about 28% and just over 36% in the biggest provinces. On $1,000 of interest that’s $282 in British Columbia and $361 in Quebec.

Here’s what the same interest costs someone with $60,000 of taxable income, using the 2026 federal and provincial rates (opens in a new tab).

Each rate combines the federal bracket at this income (20.5%) with the provincial one. Quebec’s accounts for the federal abatement, explained further down.

What a 2.75% account really pays after tax

Say you have $10,000 in a savings account paying 2.75%, roughly the going rate on an online savings account in 2026. That’s $275 of interest over a year. In Ontario at $60,000 of income, $82 goes to tax and you keep $193, so the account’s real rate to you is 1.93%. In Quebec it’s 1.76%.

Now put that beside prices. Canada’s CPI rose 2.8% (opens in a new tab) in the year to June 2026. After tax, an account at that rate leaves you slightly behind where you started in buying power.

None of which is a reason to stop saving. Cash you can reach in a day is worth having whatever it pays. It does mean the two free levers are worth more than another tenth of a percentage point: shelter the interest from tax, and keep the habit going.

Interest is taxed harder than a capital gain

All of your interest is taxable income. Only half of a capital gain (opens in a new tab) is. So the same $1,000, earned two ways by the same Ontario saver, costs $297 as bank interest and about $148 as a gain on a stock. Eligible Canadian dividends do better than either, because the dividend tax credit brings the same $1,000 down to roughly $64 for that saver.

You can’t fix that at the account level, since the rules follow the type of income rather than the institution paying it. What you can change is whether the interest is taxable at all.

Do you have to report interest if you never got a T5?

Yes, always. The $50 figure everyone half-remembers is a rule about the bank’s paperwork, not about your return. The CRA’s T5 guide (opens in a new tab) tells payers they don’t have to prepare a slip for “amounts paid to one recipient when the total amount for the year is less than $50”. Your side doesn’t move: line 12100 says you “must still report the income”.

Four small accounts, no T5 slips, and $160 to report

This catches people with money spread around. Four accounts at four institutions, each paying $40 of interest, produce four missing T5s and $160 of income the CRA still expects to see on your return. The slips that do get issued are filed with the CRA as well, so anything you receive is already matched against what you report.

Your December statement or your bank’s annual summary carries the number when no slip arrived. The same rule covers interest the CRA paid you on a tax refund, which appears on your notice of assessment.

Which interest rules catch people out?

Three, mostly. A compound GIC is taxed yearly even though you can’t touch the money, a joint account is split by who put the money in rather than in half, and money you hand to a spouse or a young child usually keeps being taxed in your hands. All three sit on the same CRA page, and none of them are intuitive.

A compound GIC is taxed before you see the money

Interest on a multi-year compound GIC is paid at maturity, but you report it every year as it accrues. The CRA’s own example: buy on July 1, 2024, and the interest earned to June 30, 2025 goes on your 2025 return. So a five-year compound GIC produces five tax bills and one payout, and you’ll owe the tax from other money in the meantime.

A joint account isn’t automatically split in half

You report your share “based on how much you contributed to the account”, not half because there are two names on it. A joint account funded entirely from one spouse’s pay is that spouse’s interest for tax purposes, even when the slip arrives with both names printed on it. Couples who assume a 50/50 split can put income on the lower earner’s return that was never theirs.

Money in a child’s name is usually still yours

Invest money in your child’s name and, generally, you report the income it earns. Same with a spouse: the attribution rules pull interest on money you gave or lent back onto your own return, which is why splitting savings across a household rarely works as a tax strategy.

One exception is worth knowing. If you deposit Canada Child Benefit payments into an account in your child’s name, the interest on those payments belongs in your child’s income rather than yours. Most children owe no tax, so that interest is effectively tax free. It’s the one household savings account that can compound untaxed without a registered plan.

How do you stop paying tax on savings interest?

Move the money into a registered account, where the interest is sheltered for as long as it stays there. For an emergency fund or a short-term goal, that decision is usually worth more than any rate difference between banks.

The TFSA is the plain answer for money you might need, because withdrawals aren’t taxed and the room comes back the following January. On the $10,000 example above, holding it in a TFSA rather than a taxable account is worth about $82 a year in Ontario. Contribution limits come from the CRA’s published limits table (opens in a new tab).

If you’re deciding which of the three to fill first, we’ve set out the order in RRSP vs TFSA vs FHSA.

What’s different if you live in Quebec?

You get two slips and file two returns. A Quebec resident earning interest receives a T5 for the federal return and an RL-3 for the provincial one (opens in a new tab), and the $50 rule applies to both: below that neither slip is issued, and the income is still reportable.

The rate is the other difference, and it’s smaller than the sticker suggests. Quebec’s provincial brackets are among the highest in the country, but the Quebec abatement (opens in a new tab) cuts federal personal income tax by 16.5 percentage points for every Quebec filer. At $60,000 of taxable income, the 20.5% federal rate becomes 17.12% and the provincial rate (opens in a new tab) is 19%, for a combined 36.12% rather than the 39.5% a straight sum would give.

Why a prize isn’t taxed at all

Every dollar of interest you earn is shared with the CRA. A prize isn’t. Winnings from a contest or a lottery are treated as windfalls here, so nothing comes off them. The dependable money gets taxed and the lucky money doesn’t, which is one of the odder corners of the Canadian system.

Lodavo is a free app that gives you a reason to save more. Link the bank account you already use, and every $25 you have saved earns a free ticket in a weekly cash draw, with at least $100 going to a user every week and a top prize of $10,000. Your savings never leave your own bank.

It won’t change the tax on your interest. But week to week it changes how the saving feels, and at these after-tax returns that counts for more than a fraction of a percentage point.

Two things worth doing this week

It could be worth checking whether your savings are sitting in a TFSA. If they aren’t and you have room, moving them takes an afternoon, costs nothing, and on the Ontario example above works out to around $82 a year on every $10,000. Then find the interest you earned last year at any bank that never sent you a slip, so next spring’s return is right the first time.

Saving is more fun when there’s a prize attached. Download Lodavo free on the Apple App Store (opens in a new tab) or Google Play Store (opens in a new tab) and start earning tickets for the weekly draw.

This article is general information, not tax advice. Rates and contribution room vary from person to person, so talk to an accountant about your own situation.

Terms and conditions apply. No purchase necessary (alternate method of entry available). Skill-testing question required. Open to legal residents of Canada who are the age of majority. Odds depend on the number of eligible entries received. Full rules and odds at our contest rules.