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How to save tax in Canada on interest income in a savings account

The tax man cometh—even for your savings account. Find out how tax works on interest earned from savings in Canada.

Savings account interest income 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?

General income is income from sources other than capital gains (which come, for example, from the stock market or real estate investments).

Interest earned from a savings account is not considered capital gains and is 100% taxable along with all your other general income.

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
  • Social benefits like Old Age Security, CPP and pensions
  • Business gambling winnings (not personal gambling earnings)

How is interest income taxed in Canada?

The interest tax rate in Canada is the same rate that applies to your other income — this is known as your marginal tax rate.

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 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 your average tax rate?

Your average tax rate is calculated by dividing your total taxes you paid by your total earnings, in a given year.

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.

Find out the difference between gross, taxable and net income below.

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.

What is net income in Canada? 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 TFSA

You can avoid paying tax on a savings account in Canada by opening a tax-free savings account, or TFSA in 2024. Canadian residents who are 18 or older and have a valid Social Insurance Number (SIN) are eligible to open a TFSA. To open an account, just follow through these steps:

  1. Decide on how you want to save or invest. You can open a TFSA and use it just like a traditional account that saves you taxes on savings account interest, but you can also opt for investing in a GIC, ETF, stocks or bonds. With interest rates so high right now, holding high-interest savings in a TFSA makes sense for many people—as does holding a GIC in a TFSA.
  2. Choose a banking provider. From major banks, digital banks, credit unions, online trading platforms and robo-advisors, you have many options to choose where you want to open your TFSA. Comparing accounts and interest rates to find the best account for your financial needs.
  3. Open your TFSA account. Once you’ve decided on a banking provider, or issuer of your TFSA, get in touch to open your account. It likely won’t take more than 20 minutes if you have all the documentation ready. When you’re all set up, you can begin making contributions right away. The TFSA contribution limit has changed over the years (and in 2023, it’s now $6,500), the contribution room accumulates every year just like an RRSP.

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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 121 of your T1 Income Tax and Benefit Return. Banks and other investment organizations are also required to report the details of the interest they pay to account holders and investors to the CRA. If you bank with a traditional bank or credit union, chances are your financial institution will issue you a tax receipt for interest earned on your savings accounts. Use this tax receipt when completing your T1.

The CRA then verifies the investment income you report with the amount reported by your bank, and 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?

When you open a savings account, your bank may request your SIN.

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, you must provide your SIN when asked.

If you haven’t given your bank your SIN or if you’re a nonresident of Canada, the bank must withhold an amount from the interest you earn and send it straight to the CRA. To avoid withholding tax, you can either supply your SIN when you apply for an account or get in touch with your financial institution at any time to provide it via online banking, over the phone or at your nearest 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 121 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 have both account holders’ names listed, but only one SIN. 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?

Little boy calculating his savings

If a parent provides funds for their child’s account, 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 in their name etc.) reaches a threshold.

If you want to avoid paying income tax on monetary gifts to your child, consider holding the gift until the child legally becomes an adult. 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 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 have a robo-advisor invest for you.

Open a Simplii High Interest Savings Account

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Income tax rate in Canada

Income tax is the sum of both federal and provincial taxes. Here’s the breakdown of income tax rates in Canada for 2022 and 2023:

Federal tax rate2022 bracket2023 bracket
15%Up to $50,197Up to $53,359
20.5%On the next $50,195 ($50,197 – $100,392)On the next $53,358 ($53,359 – $106,717)
26%On the next $55,233 ($100,392 – $155,625)On the next $58,713 ($106,717 – $165,430)
29%On the next $66,083 ($155,625 – $221,708)On the next $70,245 ($165,430 – $235,675)
33%Over $221,708On the next $235,675
Province2022 rate2023 rate
Nova Scotia8.79% on the first $29,590
14.95% on the next $29,590 – $59,180
16.67% on the next $59,180 – $93,000
17.5% on the next $93,000 – $150,000
21% over $150,000
8.79% on the first $29,590
14.95% on the next $29,590 – $59,180
16.67% on the next $59,180 – $93,000
17.5% on the next $93,000 – $150,000
21% over $150,000
New Brunswick9.40% on the first $44,887
14.82% on the next $44,887 – $89,775
16.52% on the next $89,775 – $145,955
17.84% on the next $145,955 – $166,280
20.30% over $166,280
9.4% on the first $47,715
14% on the next $47,715 – $95,431
16% on the next $95,431 – $176,756
19.5% over $176,756
Quebec15% on the first $46,295
20% on the next $46,295 – $92,580
24% on the next $92,580 – $112,655
25.75% over $112,655
15% on the first $49,275
20% on the next $49,275 – $98,540
24% on the next $98,540 – $119,910
25.75% over $119,910
Ontario5.05% on the first $46,226
9.15% on the next $46,226 – $92,454
11.16% on the next $92,454 – $150,000
12.16% on the next $150,000 – $220,000
13.16% over $220,000
5.05% on the first $49,231
9.15% on the next $49,231 – $98,463
11.16% on the next $98,463 – $150,000
12.16% on the next $150,000 – $220,000
13.16% over $220,000
Manitoba10.8% on the first $34,431
12.75% on the next $34,431 – $74,416
17.4% over $74,416
10.8% on the first $36,842
12.75% on the next $36,842 – $79,625
17.4% over $79,625
Saskatchewan10.5% on the first $46,773
12.5% on the next $46,773 – $133,638
14.5% over $133,638
10.5% on the first $49,720
12.5% on the next $49,720 – $142,058
14.5% over $142,058
Alberta10% on the first $134,238
12% on the next $134,238 – $161,086
13% on the next $161,086 – $214,781
14% on the next $214,781 – $322,171
15% than $322,171
10% on the first $142,292
12% on the next $142,292 – $170,751
13% on the next $170,751 – $227,668
14% on the next $227,668 – $341,502
15% over $341,502
British Columbia5.06% on the first $43,070
7.7% on the next $43,070 – $86,141
10.5% on the next $86,141 – $98,901
12.29% on the next $98,901 – $120,094
14.7% on the next $120,094 – $162,832
16.8% on the next $162,832 – $227,091
20.5% over $227,091
5.06% on the first $45,654
7.7% on the next $45,654 – $91,310
10.5% on the next $91,310 – $104,835
12.29% on the next $104,835 – $127,299
14.7% on the next $127,299 – $172,602
16.8% on the next $172,602 – $240,716
20.5% over $240,716
Yukon6.4% on the first $50,197
9% on the next $50,197 – $100,392
10.9% on the next $100,392 – $155,625
12.8% on the next $155,625 – $500,000
15% over $500,000
6.4% on the first $53,359
9% on the next $53,359 – $106,717
10.9% on the next $106,717 – $165,430
12.8% on the next $165,430 – $500,000
15% over $500,000
Northwest Territories5.9% on the first $45,462
8.6% on the next $45,462 – $90,927
12.2% on the next $90,927 – $147,826
14.05% over $147,826
5.9% on the first $48,326
8.6% on the next $48,326 – $96,655
12.2% on the next $96,655 – $157,139
14.05% over $157,139
Nunavut4% on the first $47,862
7% on the next $47,862 – $95,724
9% on the next $95,724 – $155,625
11.5% over $155,625
4% on the first $50,877
7% on the next $50,877 – $101,754
9% on the next $101,754 – $165,429
11.5% over $165,429
Newfoundland and Labrador8.7% on the first $39,147
14.5% on the next $39,147 – $78,294
15.8% on the next $78,294 – $139,780
17.8% on the next $139,780 – $195,693
19.8% on the next $195,693 – $250,000
20.8% on the next $250,000 – $500,000
21.3% on the next $500,000 – $1,000,000
21.8% over $1,000,000
8.7% on the first $41,457
14.5% on the next $41,457 – $82,913
15.8% on the next $82,913 – $148,027
17.8% on the next $148,027 – $207,239
19.8% on the next $207,239 – $264,750
20.8% on the next $264,750 – $529,500
21.3% on the next $529,500 – $1,059,000
21.8% over $1,059,000
Prince Edward Island9.8% on the first $31,984
13.8% on the next $31,984 – $63,969
16.7% over $63,969
9.8% on the first $31,984
13.8% on the next $31,984 – $63,969
16.7% over $63,969


If you live in Ontario and make $64,000 per year at your day job but also earned $750 from savings account interest in 2022, then your total income for the year would be $64,000 + $750 = $64,750. Your income tax would be calculated as follows:

Federal income tax:

  • (15% on the first $50,197) + (20.5% on the rest) =
  • $7,529.55 + $2,983.37 =
  • $10,512.92

Provincial income tax:

  • (5.05% on the first $46,226) + (9.15% on the rest) =
  • $2,334.41 + $1,694.95 =
  • $4,029.36

Total: $14,542.28

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 reflect do not 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.). Speak with a tax accountant or a lawyer who specializes in tax law for more details on how savings account interest affect your tax situation.

Finder survey: What type of financial accounts did Canadians of different ages plan to open in 2023?

ResponseGen ZGen YGen XBaby Boomers
Savings account41.11%32.45%27.12%16.88%
Chequing account34.44%20.21%22.37%11.88%
High-interest savings account (HISA)19.44%16.76%14.92%10.63%
Credit card17.22%13.03%13.56%11.88%
Digital bank account16.67%15.43%17.63%11.25%
Kids’ or teens’ bank account16.11%17.02%10.85%3.75%
Will not open a new bank account or banking product13.33%16.22%27.46%45%
Business bank account12.22%11.17%13.9%5%
Student bank account11.11%5.85%4.41%2.5%
Investment account6.11%6.38%7.12%2.5%
Prepaid credit card3.33%4.52%6.1%3.13%
Joint account1.11%1.33%1.36%0.63%
Source: Finder survey by Pollfish of 1011 Canadians, April 2023

Frequently asked questions

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To make sure you get accurate and helpful information, this guide has been edited by Romana King as part of our fact-checking process.
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Associate editor

Stacie Hurst is an editor at Finder, specializing in a wide range of topics including stock trading, money transfers, loans, banking products, online shopping and streaming. She has a Bachelor of Arts in Psychology and Writing, and she completed one year of law school in the United States before deciding to pursue a career in the publishing industry. When not working, Stacie can usually be found watching K-dramas or playing games with her friends and family. See full bio

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Scott Birke is the Director of SEO at Wise Publishing and formerly Finder Canada's publisher. He has previously worked as the director of content operations at Verticalscope Inc., editorial director at SBC Media Group, and the editor of SBC Business Magazine. He has also freelanced for dozens of national and international publications including the National Post, Mountain Life and Outside's Rock and Ice Magazine. Scott has a B.A. in Sociology from the University of Guelph. He loves snowboarding, scuba diving, travelling with his family and applying his knowledge of banking and credit cards. See full bio

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