Is Interest From A Savings Account Taxable In Canada?

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Caitlin Wood, BA
Editor-in-Chief at Loans Canada
Caitlin Wood has more than a decade of experience helping Canadian consumers learn how to take control of their finances. Expertise:
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As a senior member of the Loans Canada team, Priyanka Correia is committed to empowering Canadians with the knowledge they need to make smart financial choices.
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Updated On: July 30, 2025
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It may not break the bank, but that few dollars in interest you earn from your savings account still count as income. And yes, the CRA wants its share. 

Whether you keep your money in a high-interest savings account, a GIC or a typical bank account, the interest it earns may be taxable. The good news is, there are some potential alternatives and legal methods to shelter your savings from tax and avoid surprises come tax season.


Key Points

  • Interest from regular and high-interest savings accounts is fully taxable as income at your marginal tax rate.
  • Registered accounts like TFSAs and RRSPs allow you to earn interest tax-free or tax-deferred.
  • All amounts of interest must be reported on your tax return, even if you don’t receive a T5 slip.

Is Savings Account Interest Taxable In Canada?

Yes, any interest you earn from a regular savings account in Canada is taxable and must be reported to the Canada Revenue Agency (CRA). 

Most banks and credit unions will give you a T5 slip (or an RL-3 if you live in Québec) if you earn $50 or more in interest during the year. However, even if your total interest income is below that threshold, and no T5 is issued, the CRA still expects you to report it manually on your tax return.

Savings account interest is taxed as regular income, meaning it’s added to your total earnings and taxed at your marginal rate, with no special discounts. An exception is if your savings are held inside registered plans like a TFSA or RRSP, where interest can grow tax-free or tax-deferred.

Example: If you have an account balance of $20,000 with a savings interest rate of 1.75% (compounded monthly), you’d earn $352.82 in one year. The interest earned will need to be reported when you file your income taxes.

What Is A Savings Account?

A savings account is a secure place to store your money, where you earn a bit of interest over time. Savings accounts are typically offered by banks, credit unions and online financial institutions, and they’re best used for short-term savings goals or emergency funds.

Savings accounts are often defined in contrast to chequing accounts, which are made for everyday spending. They’re designed to hold money you don’t need right away. For this reason, they often have limits on the number of withdrawals you can make each month, and in return for holding your money, a bank will offer you interest on your balance.

Learn more: Is It Worth Putting Money In A Savings Account In Canada?


When Is Savings Interest Taxable?

In Canada, income generated by investments, including interest on savings, is considered fully taxable in the year it is earned. This applies to all interest earned outside of registered accounts like a TFSA or RRSP.

Regular Savings Accounts

Interest earned from a standard savings account at a bank or credit union must be reported as income on your tax return. If the total annual interest is $50 or more, your financial institution should issue a T5 slip. But even if it’s less than $50, you’re still responsible for reporting it to the CRA.

High-Interest Savings Accounts 

These accounts offer better interest rates than traditional savings accounts, but the tax application is exactly the same. Any interest you earn is taxed at your marginal income tax rate, and it must be reported, regardless of whether you receive a T5 slip.

Income From Non-Registered Investment Accounts

There are two main types of non-registered investment accounts: margin accounts and cash accounts. Income generated from these accounts are all taxable. Any interest, dividends and capital gains earned are taxable and must be reported on your income tax return. 

  • Interest. If you hold a GIC in a non-registered account, the interest you earn from it must be reported, regardless of whether it’s paid out or just accrued. Essentially, if it’s accruing annually, you must report the amount even if the GIC has yet to mature.
  • Dividends. Dividends earned in these accounts must also be reported for income tax purposes. Do note that dividend income is generally taxed at a different rate.
  • Capital Gains: You must pay taxes on your realized gains. Meaning, only when you sell a stock for a profit, must you report the income for taxes.

What About Interest In Registered Accounts?

Registered accounts refer to special investment or savings accounts that are registered with the federal government and offer tax advantages. These include the TFSA, RRSP, RESP and the FHSA.

These accounts are designed to encourage saving and investing by offering tax advantages, and that includes how interest income is treated.

Here’s how it looks for each account type.

TFSA (Tax-Free Savings Account):

Any interest you earn inside a TFSA is completely tax-free, even when you withdraw it. That includes interest from high-interest savings accounts, GICs, or bonds held within the TFSA. Similarly, all realized gains from investments are also tax-exempt.

Learn more: Tax-Free Savings Account (TFSA): What You Need To Know 

RRSP (Registered Retirement Savings Plan)

Interest income in an RRSP is not tax-free, but tax-deferred. That means you won’t pay tax on the interest while your money is in your account, but you will pay tax on the full withdrawal amount when you withdraw, which is ideally not before you’ve retired.

Learn more: RRSP Guide In Canada 

RESP (Registered Education Savings Plan)

Interest grows tax-free inside an RESP. When funds are withdrawn for educational purposes, the student pays tax only on the growth and grants, not on the contributions.

FHSA (First Home Savings Account)

Like a TFSA, the interest earned in an FHSA is tax-free while it stays in the account and when it’s withdrawn for a qualifying home purchase.

In all of these cases, the key benefit is tax sheltering, i.e. allowing your interest income to grow without being taxed year after year, which helps your savings compound more efficiently over time.

Learn more: What Is The First Home Savings Account (FHSA)?


How Is Savings Account Interest Taxed?

In Canada, interest earned from a savings account or a GIC is taxed as regular income, rather than as capital gains or dividends.

Taxed As Income

Any interest you earn, whether that’s from a regular savings account or a GIC, is added to your total income for the year. It’s treated just like employment income when it comes to taxes.

Fully Taxable At Your Marginal Rate

There’s no preferential tax treatment for interest income. It’s fully taxable at your marginal tax rate, which means the more you earn, the higher the rate you might fall into.

Not Eligible For Tax Credits Or Breaks

Unlike dividends, which may qualify for the dividend tax credit, or capital gains, which are only 50% taxable, savings account interest doesn’t benefit from any particular tax incentives.

No Withholding Tax On Domestic Interest

If you earn interest from a Canadian bank or credit union, there’s no withholding tax, i.e. the full amount is paid to you, and it’s up to you to report it on your tax return.


Who Pays Taxes on Joint Savings Accounts?

If you share a joint savings account with a spouse or family member, for example, the interest earned still needs to be reported as income. Here are some key points to keep in mind:

  • Tax is based on ownership share. The CRA expects joint account holders to report interest in proportion to how much each person contributed to the account. For example, if you and your spouse each contributed 50% of the funds, you should each report 50% of the earned interest on your individual tax returns.
  • Keep good records. It’s important to keep a clear record of who contributed what and when. This should make it easier when it comes to reporting the income. And although it’s unlikely, it is possible for the CRA to request documentation if the reported split seems inaccurate.
  • Spousal attribution rules may apply. If one spouse gives money to the other to deposit into a joint account, certain attribution rules may kick in, meaning the original contributor may still be taxed on all the interest.

How To Report Savings Interest On Your Taxes?

If you have interest earned from a savings account, here’s how you can do it: 

Step 1. Collect Your Documents

Your financial institution should issue you a T5 slip (Statement of Investment Income) if the total interest you earned from them is $50 or more in a calendar year. You’ll receive this form before the tax filing deadline, and a copy is also sent to the CRA.

Note: Even if your total interest is less than $50, that doesn’t mean it’s tax-free. You’re still required to report it. Similarly, the CRA expects you to add up interest from all savings accounts, even those where the interest earned wasn’t significant enough to trigger a T5 slip.

Step 2. Use Line 121 On Your Return

Interest income is reported on Line 121 of the T1 personal income tax return. This line includes interest from savings accounts, GICs, term deposits and other savings sources.

Make sure you’re thorough and include savings from all sources, such as online bank accounts and credit unions, high-interest savings accounts and any other non-registered interest-bearing accounts. If you have multiple accounts, it’s your responsibility to total the annual interest and report it accurately to the CRA.


How To Avoid Paying Taxes On Savings Interest

While you can’t legally avoid taxes on interest earned in regular savings accounts, there are a few smart ways to reduce your tax burden, especially if you have the time to plan ahead.

Use A TFSA For Interest-Earning Investments

A TTFSA is one of the best tools available to shelter interest income from tax. Any interest you earn inside a TFSA is completely tax-free, and it doesn’t need to be reported on your return, even when you withdraw.

Many Canadians use their TFSA only for short-term savings, but it’s also a great place to hold GICs, high-interest savings and even bonds, especially if your marginal tax rate is on the higher end. 

Income Splitting Tax Strategies

If your spouse or common-law partner is in a lower tax bracket, you may be able to shift some interest income to them through a prescribed rate loan strategy. However, this is a long-term planning strategy that can be complex, so it’s best to work with your tax advisor to avoid attribution rules.

Keep Lower Savings Balances In Non-Registered Accounts

If you’re earning a small amount of interest, i.e., less than $50 per year, the tax impact will be minimal, especially if it doesn’t affect your overall tax bracket. But otherwise, you might consider keeping just an emergency fund in your regular savings account, and moving everything else into a TFSA or RRSP.

Consider Other Investments 

Unlike investment opportunities, such as capital gains, are taxed more favourably at just 50%. 

If you’re saving for a medium to long-term goal, you might consider shifting some funds into low-risk ETFs or mutual funds that aim for growth rather than interest. Just note that capital gains investing does come with more risk, and is better suited for non-emergency funds.


Conclusion

While interest earned on your savings does count as taxable income in Canada, using registered accounts like a TFSA are a viable alternative, and can help you grow your money tax-free. 


Savings Interest FAQs

Do you pay tax on interest from savings accounts in Canada?

Yes. Interest earned from regular or high-interest savings accounts is considered taxable income in Canada. It must be reported on your tax return and is taxed at your marginal tax rate.

How much interest can you earn in a savings account?

It depends on the account type and the financial institution. As of mid-2025, high-interest savings accounts can offer rates between 3.5% and 5%, while standard accounts typically earn under 1%. That said, interest rates will fluctuate with market conditions.

How much will I be taxed? 

Interest income is taxed at your full marginal rate, just like employment income. For example, if you’re in a 33% tax bracket, you’ll pay 33 cents in tax for every $1 of interest earned. There’s no special tax credit or reduced rate for interest income in non-registered accounts.
Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over ten years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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