Your savings and investment income get added to your total income on your annual tax return.
Putting your money in a TFSA or RRSP can help you save money on tax.
Like other forms of income, interest earned on savings accounts is taxable in Canada. We break down the interest income tax rate in Canada and how joint accounts and kids’ savings accounts are taxed. Plus, get tips for finding the best high-interest savings account for your needs.
Is interest earned on a savings account taxable in Canada?
Yes, interest earned on your savings account is taxable in Canada. You’re not taxed on savings account deposits because you’ve already paid income tax on this. However, interest earned on deposits is considered general income and is taxed in the year it’s received. In short, you do pay tax on savings account interest.
What is “general income” according to the CRA?
General income is income from sources other than capital gains (which come, for example, from the stock market or real estate investments). According to the CRA, sources of general income include:
Interest
Wages
Salaries
Tips
Commissions
Bonuses
Dividends
Rent
Royalties
Other types of compensation from employment
Net income from a sole proprietorship, corporation or cooperative
Employment insurance
Social benefits like OAS, CPP, QPP, UCCB and pensions
Business gambling winnings (not personal gambling earnings)
Taxable scholarships, fellowships, bursaries and artists’ project grants
Interest earned from a standard savings account is not considered capital gains and is 100% taxable along with all your other general income.
How is interest income taxed in Canada?
Tax on interest income in Canada is based on your total taxable income, which is your gross income from all sources minus deductions. This determines your tax bracket and the percentage you have to pay to the CRA.
Interest income is taxed at the same rate that applies to your other income — this is known as your marginal tax rate.
What is a marginal tax rate?
Your marginal tax rate is the tax rate (the percentage of tax charged, based on a tax bracket) paid on the next dollar earned. Your marginal tax rate can change from year to year, depending on how much you earn.
What is a tax bracket?
In Canada, income tax is calculated based on brackets of income. The lowest income brackets pay the lowest tax rate. The more you earn, the higher the tax rate applied to those earnings. As a result, every dollar earned will fall into an income bracket and pay the associated tax.
What is your average tax rate?
Your average tax rate is calculated by dividing the total taxes you paid by your total earnings in a given year.
What’s the difference between gross income, taxable income and net income?
Gross income is the amount of income you receive before any taxes or deductions. This could come from various sources, including employers, clients, savings account interest, investment returns and rental income.
Taxable income is your gross income minus any applicable tax deductions. Your tax rate is determined by your total taxable income from all sources.
Net income is your gross income minus applicable taxes and deductions. It determines your eligibility for federal and provincial/territorial tax credits, GST/HST credits and other benefits.
How to save on taxes in Canada by opening a registered account
You can reduce or defer taxes on your savings by using a registered account, such as a tax-free savings account (TFSA) or registered retirement savings plan (RRSP). You need to be a Canadian resident, have a valid Social Insurance Number (SIN) and be 18 or older to open a TFSA, but there’s no minimum age for an RRSP.
To open a registered account, just follow these steps:
Decide on how you want to save or invest. Registered accounts can be used like a traditional savings account to earn interest tax-free (with a TFSA) or defer taxes until withdrawal (with an RRSP). You can also invest in GICs, ETFs, stocks or bonds within these accounts.
Choose a provider. From major banks, digital banks, credit unions, online trading platforms and robo-advisors, you have many options for opening a registered account. Compare account features and interest rates to find the best fit for your financial needs.
Open your account and start contributing. Once you’ve chosen a provider, you can open your registered account in under 20 minutes if you have all the documentation ready. Just be careful not to exceed your contribution limit or you’ll have to pay a penalty. TFSAs have an annual limit of $7,000 for 2025 and 2026, while RRSP contribution room is 18% of your previous year’s earned income up to a limit of $32,490 in 2025 and $33,810 in 2026.
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Why do I need to declare savings account interest?
The Canada Revenue Agency (CRA) requires you, by law, to declare interest and other forms of investment income on Line 12100 of your T1 Income Tax and Benefit Return.
If you earn $50 or more in interest during the year, your financial institution will typically issue a T5 slip summarizing the amount paid to you. However, you’re required to report all interest earned, even if you don’t receive a T5.
The CRA also receives a copy of your T5 slip and matches it to your return. If there are any discrepancies, your tax return will be adjusted and fines may apply.
Do I have to provide my Social Insurance Number (SIN) to my bank?
Ordinarily, you don’t have to give your SIN to private sector organizations, even if they ask for it. However, according to Section 2 of the Social Insurance Number Code of Practice, you have to provide your SIN if a private sector organization needs it to comply with government requirements, such as reporting your income or calculating taxes.
Because banks are required to report interest income to the CRA on T5 slips, you must provide your SIN when asked.
If you’re a Canadian resident and you don’t provide your SIN, the bank will still issue a T5 slip without it, but the CRA may impose a $100 penalty on you for non-compliance. If you’re a non-resident of Canada and don’t provide your SIN, the bank is required to withhold 25% of your interest earned and remit it to the CRA unless a tax treaty reduces the rate.
To avoid penalties or withholding tax, you can supply your SIN when you open the account or at any time afterward via online banking, phone or at a branch.
Who pays tax on joint accounts?
The CRA requires joint account holders to declare interest income according to how much each account holder contributed to the account. So, for example, a joint account holder who contributes 60% of the account balance will declare 60% of the interest income on Line 12100 of their tax return. The other joint account holder will only declare 40% of the interest income on their tax return.
The CRA knows whose names are on the savings account, but it doesn’t know how much money each account holder contributed. Therefore, one T5 form will be sent out for the full amount of interest earned on the account. Each account holder is individually responsible for declaring the right amounts on his or her tax return.
Note that the T5 will typically have both account holders’ names listed, but only the SIN of the primary account holder. A recipient indicator on the slip tells the CRA that the account is jointly held, so both account holders can use that slip when filing their tax returns.
Do I have to pay tax if I transfer funds out of my savings account?
Transferring interest income out of a savings account doesn’t affect the taxability of that income. This is true even if you transfer funds into a tax-sheltered account like a Tax-Free Savings Account (TFSA).
Interest becomes taxable when it’s earned, regardless of what you do with the funds afterwards. To be tax-free, interest has to have been earned while funds are held in a tax-sheltered account.
Note that you don’t have to pay income tax on funds withdrawn from a TFSA (assuming you haven’t met or exceeded your yearly TFSA contribution limit). But if you put those funds into a regular savings account and it begins to earn interest, that interest becomes taxable.
What about interest earned on children’s savings accounts?
If a parent provides funds for their child’s account and the child is under 18, any money made off that gift or investment is considered “first-generation income” and is attributed to the parent as part of his or her income. The parent then pays income tax on this amount. This is to deter parents from skirting income tax payments by giving to their children.
Money subsequently made on the amount given to the child is considered “second-generation income” and is attributed to the child.
Children can be required to pay income tax if the income they make in their name from all sources (investments, part-time job, business interests, etc.) exceeds the CRA’s basic personal amount, which is $16,129 for 2025 and $16,452 for 2026.
If you want to avoid paying income tax on monetary gifts to your child, consider holding the gift until the child reaches the age of majority in your province or territory. Then you can transfer the money without worrying about paying first-generation income tax.
How do I find the best savings accounts for my tax needs?
Check interest rates. With the compounding effects of interest, even slight differences in rates can have a big impact on your overall savings.
Read the fine print. Be aware of the regular rates that will apply to an account after high-rate promotional periods end. Some rates may come with eligibility criteria you may have to meet, such as minimum deposits or minimum balances.
Look at all the account features. Don’t just look at the interest rate. Consider other important factors like hidden fees and ways to transfer funds in/out of your account.
Consider inflation. When considering the returns provided by a savings account, remember to take into account inflation as well as the tax you need to pay on interest. High-interest savings accounts can help offset the decreasing value of the dollar.
Explore other accounts with potentially higher returns. Savings accounts are low risk and low reward. If you don’t need easy access to funds and are comfortable taking on more risk, consider opening an investment account or having a robo-advisor invest for you.
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Income tax is the sum of both federal and provincial/territorial taxes. Here’s the breakdown of income tax rates in Canada for 2025 and 2026:
Federal tax rate
2025 bracket
2026 bracket
14%
N/A
On the first $58,523
14.5%
On the first $57,375
N/A
20.5%
On the next $57,375–$114,750
On the next $58,523–$117,045
26%
On the next $114,750–$177,882
On the next $117,045–$181,440
29%
On the next $177,882–$253,414
On the next $181,440–$258,482
33%
Over $253,414
Over $258,482
Province
2025 rate
2026 rate
Nova Scotia
8.79% on the first $30,507 14.95% on the next $30,507–$61,015 16.67% on the next $61,015–$95,883 17.5% on the next $95,883–$154,650 21% over $154,650
8.79% on the first $30,995 14.95% on the next $30,995–$61,991 16.67% on the next $61,991–$97,417 17.5% on the next $97,417–$157,124 21% over $157,124
New Brunswick
9.4% on the first $51,306 14% on the next $51,306–$102,614 16% on the next $102,614–$190,060 19.5% over $190,060
9.4% on the first $52,333 14% on the next $52,333–$104,666 16% on the next $104,666–$193,861 19.5% over $193,861
Quebec
14% on the first $53,255 19% on the next $53,255–$106,495 24% on the next $106,495–$129,590 25.75% over $129,590
14% on the first $54,345 19% on the next $54,345–$108,680 24% on the next $108,680–$132,245 27.75% over $132,245
Ontario
5.05% on the first $52,886 9.15% on the next $52,886–$105,775 11.16% on the next $105,775–$150,000 12.16% on the next $150,000–$220,000 13.16% over $220,000
5.05% on the first $53,891 9.15% on the next $53,891–$107,785 11.16% on the next $107,785–$150,000 12.16% on the next $150,000–$220,000 13.16% over $220,000
Manitoba
10.8% on the first $47,564 12.75% on the next $47,564–$101,200 17.4% over $101,200
10.8% on the first $47,000 12.75% on the next $47,000–$100,000 17.4% over $100,000
Saskatchewan
10.5% on the first $49,720 12.5% on the next $49,720–$142,058 14.5% over $142,058
10.5% on the first $54,532 12.5% on the next $54,532–$155,805 14.5% over $155,805
Alberta
10% on the first $151,234 12% on the next $151,234–$181,481 13% on the next $181,481–$241,974 14% on the next $241,974–$362,961 15% over $362,961
8% on the first $61,200 10% on the next $61,200–$154,259 12% on the next $154,259–$185,111 13% on the next $185,111–$246,813 14% on the next $246,813–$370,220 15% over $370,220
British Columbia
5.06% on the first $49,279 7.7% on the next $49,279–$98,560 10.5% on the next $98,560–$113,158 12.29% on the next $113,158–$137,407 14.7% on the next $137,407–$186,306 16.8% on the next $186,306–$259,829 20.5% over $259,829
5.06% on the first $50,363 7.7% on the next $50,363–$100,728 10.5% on the next $100,728–$115,648 12.29% on the next $115,648–$140,430 14.7% on the next $140,430–$190,405 16.8% on the next $190,405–$265,545 20.5% over $265,545
Yukon
6.4% on the first $57,375 9% on the next $57,375–$114,750 10.9% on the next $114,750–$177,882 12.8% on the next $177,882–$500,000 15% over $500,000
6.4% on the first $58,523 9% on the next $58,523–$117,045 10.9% on the next $117,045–$181,440 12.8% on the next $181,440–$500,000 15% over $500,000
Northwest Territories
5.9% on the first $51,964 8.6% on the next $51,964–$103,930 12.2% on the next $103,930–$168,967 14.05% over $168,967
5.9% on the first $53,003 8.6% on the next $53,003–$106,009 12.2% on the next $106,009–$172,346 14.05% over $172,346
Nunavut
4% on the first $54,707 7% on the next $54,707–$109,413 9% on the next $109,413–$177,881 11.5% over $177,881
4% on the first $55,801 7% on the next $55,801–$111,602 9% on the next $111,602–$181,439 11.5% over $181,439
Newfoundland and Labrador
8.7% on the first $44,192 14.5% on the next $44,192–$88,382 15.8% on the next $88,382–$157,792 17.8% on the next $157,792–$220,910 19.8% on the next $220,910–$282,214 20.8% on the next $282,214–$564,429 21.3% on the next $564,429–$1,128,858 21.8% over $1,128,858
8.7% on the first $44,678 14.5% on the next $44,678–$89,354 15.8% on the next $89,354–$159,528 17.8% on the next $159,528–$223,340 19.8% on the next $223,340–$285,319 20.8% on the next $285,319–$570,638 21.3% on the next $570,638–$1,141,275 21.8% over $1,141,275
Prince Edward Island
9.5% on the first $33,328 13.47% on the next $33,328–$64,656 16.6% on the next $64,656–$105,000 17.62% on the next $105,000–$140,000 19% over $140,000
9.5% on the first $33,928 13.47% on the next $33,928–$65,820 16.6% on the next $65,820–$106,890 17.62% on the next $106,890–$142,250 19% over $142,250
Example:
If you live in Ontario and make $60,000 per year at your day job but also earn $500 in savings account interest in 2026, then your total income for the year would be $60,000 + $500 = $60,500. Your income tax would be calculated as follows:
Federal income tax: You don’t have to pay income tax on the first $16,452 because of the “basic personal amount” federal tax credit. This leaves $44,048 in taxable income, which is federally taxed at a rate of 14%, or $6,166.72.
Provincial income tax: You don’t have to pay income tax on the first $12,989 because of the “basic personal amount” Ontario tax credit. This leaves $47,511 in taxable income, which is provincially taxed at a rate of 5.05%, or $2,399.30.
Total:$8,566.02
The interest income tax rate in Canada is the same as your federal/provincial income tax rates, because interest counts as part of your overall income.
Note that the totals listed don’t take into account CPP, E.I., tax credits or tax deductibles. So the actual amount you’d end up paying would be different. This is just to give you a basic idea of how the tax rate on interest income in Canada works.
Bottom line
Interest earned on savings accounts is taxable in Canada. Your tax rate depends on your total income from all sources (employment, investments, savings account interest etc.). The higher your income, the higher your marginal rate. To minimize or defer tax on savings interest, consider using a TFSA or RRSP. Just keep an eye on your contribution limit.
Speak with a tax accountant or a lawyer who specializes in tax law for more details on how savings account interest affects your tax situation.
You don't have to pay taxes on savings account deposits in Canada, but you're taxed on interest earned from savings account deposits (unless you have a TFSA or RRSP and don't exceed your annual contribution limit).
Your interest income tax rate in Canada is the same as your tax rate for other types of income. The rate depends on your tax bracket, which is determined by adding together your total income from all sources and subtracting any applicable tax deductions.
No, you don't have to report income earned in a TFSA or RRSP unless you've exceeded your annual contribution limit.
For the 2025 tax year, income tax brackets in Ontario are as follows:
5.05% on the first $52,886
9.15% on the next $52,886 – $105,775
11.16% on the next $105,775 – $150,000
12.16% on the next $150,000 – $220,000
13.16% over $220,000
For the 2026 tax year, income tax brackets in Ontario are as follows:
5.05% on the first $53,891
9.15% on the next $53,891–$107,785
11.16% on the next $107,785–$150,000
12.16% on the next $150,000–$220,000
13.16% over $220,000
In Canada, you're not taxed simply for holding funds in a bank account. Rather, you're taxed on earnings generated from bank account deposits. So, there's no limit to the amount of money you can have in your bank account without being taxed in Canada — only the interest or investment income it earns is taxable.
Nontaxable income in Canada doesn't have to be reported with your other income and doesn't trigger any income tax. Examples include:
GST/HST credits
Most types of gifts and inheritances
Provincial/territorial compensation paid to victims of crime or motor vehicle accidents
Lottery winnings (unless determined to be business or employment income)
Most amounts received from a life insurance policy
Most types of strike pay that you received from your union
Yes, all interest earned in a non-registered savings account is considered taxable income.
If you don't report interest income in Canada, the CRA can reassess your tax return, charge interest on any taxes owed and impose penalties if they believe the omission was intentional or negligent. Even small amounts must be reported, because unreported income can trigger fines and increase the risk of future audits.
If you're a Canadian resident, you must report your worldwide income, including interest earned from foreign bank accounts, on your tax return. If you've already paid tax on that income in another country that has a tax treaty with Canada, you may be able to claim a foreign tax credit to reduce your Canadian taxes, but you still need to report the income.
Interest on a savings account is taxed in the year it's credited or paid to you, not when it accrues. This means that even if your account compounds daily but only pays out interest annually, you report and pay tax on the full amount in the year you received it.
Sources
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Stacie Hurst is an editor at Finder, specializing in loans, banking, investing and money transfers. She has a Bachelor of Arts in Psychology and Writing, and she has completed FP Canada Institute's Financial Management Course. Before working in the publishing industry, Stacie completed one year of law school in the United States. When not working, she can usually be found watching K-dramas or playing games with her friends and family.
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