{"id":824451,"date":"2019-12-19T23:39:47","date_gmt":"2019-12-20T04:39:47","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=824451"},"modified":"2026-09-09T08:16:06","modified_gmt":"2026-09-09T12:16:06","slug":"tax-implications-of-opening-a-kids-bank-account","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/banking\/kids-banking\/tax-implications-of-opening-a-kids-bank-account","title":{"rendered":"Do kids pay tax on bank accounts?"},"content":{"rendered":"

If your child\u2019s bank account earns interest, you need to know how this income is taxed, or whether you\u2019ll need to file a return at all. Canada Revenue Agency (CRA) rules require your child to report any income he or she makes on a separate tax return from yours. Keep reading to learn more about the ins and outs of taxing youth bank account balances.<\/p>

Are there any tax implications for having a children\u2019s bank account?<\/h3>

\"YoungThere are no tax requirements just for opening a kids\u2019 bank account. But you may be required to pay taxes if funds in your child\u2019s bank account earn interest.<\/p>

According to CRA guidelines, all Canadians must pay tax on earnings regardless of the person\u2019s age or the type of income (whether interest, dividends or through an appreciation in value, known as a capital gain).<\/p>

Even if your child doesn\u2019t earn employment income, the interest earned in their bank account may be taxable.<\/p>

When is interest earned on children\u2019s bank accounts taxable?<\/h3>

A parent can avoid the need to declare and pay income tax on a child\u2019s bank account or investment earnings if the child elects to file an income tax return and the bank account or investment is in the child\u2019s name.<\/p>

How tax must be declared will depend on the type of account held by your child, but in general, the following guidelines apply.<\/p>

Basic personal amount<\/h4>

The basic personal amount (BPA) is a non-refundable tax credit that lets individuals earn a certain amount of income before paying federal income tax. This means a child can earn interest in their savings account and not pay income tax if the amount earned is below the basic personal amount.<\/p>

For the 2026 tax year, the maximum federal basic personal amount is $16,452, and the minimum is $14,829. If you earn $181,440 or less, you can claim the full BPA, but the tax credit gradually decreases for higher-income earners, reaching the minimum BPA at an income of $258,482 or more. You and your child can claim the federal BPA on line 30000 of your tax return.<\/p>

You can also claim a provincial or territorial basic personal amount on line 58040 of Form 428, as income is taxed at both federal and provincial or territorial levels. Here\u2019s the 2026 BPA for every province and territory:<\/p>
NL<\/th>PE<\/th>NS<\/th>NB<\/th>ON<\/th>MB<\/th>SK<\/th>AB<\/th>BC<\/th>YT<\/th>NT<\/th>NU<\/th>QB<\/th><\/tr><\/thead>
$11,188<\/td>$15,000<\/td>$11,932<\/td>$13,664<\/td>$12,989<\/td>$15,780<\/td>$20,381<\/td>$22,769<\/td>$13,216<\/td>$14,829\u2013$16,452<\/td>$18,198<\/td>$19,274<\/td>$18,952<\/td><\/tr><\/tbody><\/table>

The government has made an exception to the basic personal amount tax credit, however, and this is known as the \u201ckiddie tax.\u201d<\/p>

What\u2019s the kiddie tax in Canada?<\/h4>

In the past, parents could give children corporate dividends to cover expenses like tuition or extracurricular activities, effectively shifting income to reduce their taxes. But this changed in 2000 when the government amended the Income Tax Act, making such dividends taxable.<\/p>

Under section 120.4 (known as the \u201ckiddie tax\u201d<\/strong>), dividends sent from a private company to children under the age of 18 are taxed at the highest federal tax rate, so long as those children have a parent residing in Canada. For perspective, the highest federal income tax rate for the 2026 tax year is 33%!<\/p>

On a positive note, the kiddie tax in Canada doesn\u2019t apply to regular interest or capital gains. Plus, children can use the dividend tax credit to lower the amount of tax they owe. No other tax credits can be similarly used, though, including the basic personal amount<\/strong>.<\/p>

If you intend to use your child\u2019s savings account to house dividends from a private company, make sure you understand the tax obligations this will cause.<\/p>

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\nDive deeper: <\/span>Our picks for the best bank accounts for kids in Canada<\/a>\n<\/div>\n<\/article>

Who declares interest income from a child\u2019s bank account?<\/h3>

Under CRA rules, declaring income and paying income tax on interest earned is no different for children than it is for adults. If a child earns money in their bank account and owes taxes, they must file a tax return. A parent cannot include the income earned on a child\u2019s tax return on their own T1 return.<\/p>

However, if the money deposited into your child\u2019s bank account is a gift, then the rules change, even if the gifted money is in non-cash forms like stocks, bonds or GICs. Under these rules:<\/p>