Do You Pay Tax on Savings Account Interest in Canada?

In most cases, yes.

If you earn interest in a regular, non-registered savings account in Canada, that interest is generally taxable and must be reported on your tax return. CRA includes interest from bank accounts under line 12100 – Interest and other investment income.

When savings account interest is taxable

Interest from a high interest savings account is usually taxable for the year it is paid or credited to you. CRA says interest from bank accounts is investment income.

This means that if your money is sitting in a regular savings account and it earns interest, that interest usually needs to be included in your income for tax purposes.

How do you report it?

You generally report savings account interest on line 12100 of your personal tax return. CRA says interest and other investment income form part of your total income and must be reported on your return.

Your bank may send you a T5 slip, which shows investment income such as interest from bank accounts. That slip helps you report the amount correctly.

What if you do not get a T5?

You may still need to report the interest.

CRA says you may not receive a T5 if your total investment income is under $50, but you still must report the income. So no slip does not automatically mean no tax reporting is required.

Are there any exceptions?

Yes. One common exception is a TFSA.

CRA says income earned inside a TFSA, including interest, is generally tax-free, even when withdrawn. So if your cash is held in a TFSA savings account, the tax treatment is usually different from a regular savings account.

A few situations that can confuse people

If you have a joint bank account, CRA says you generally report your share of the interest based on how much you contributed to the account.

Also, this article is about regular savings account interest. Other products, such as GICs and term deposits, can have their own timing rules for when interest must be reported.

What to Remember

For a regular savings account in Canada, the interest you earn is usually taxable. You generally report it on line 12100, and you may still have to report it even if you do not receive a T5 slip.

A TFSA is different because interest earned inside it is generally tax-free.