Updated Checked by the Tax-Services.ca editorial team How we check
Savings tax in Canada means one thing: interest you earn in an ordinary bank account or GIC counts as income, and you pay tax on it at your normal rate. Inside a TFSA the same interest is tax-free. That single difference decides how much of your interest you actually keep.
Is interest on savings taxable?
Yes, outside a registered account. You report it on line 12100 of your return. The CRA says to report interest earned each year even if you never got a T5 slip, and a bank may not send one when the total is under $50.
Joint accounts split the interest. The CRA says that for a joint investment you generally report your share based on how much you put in, so two people who each contributed half report half each.
There’s no separate savings tax and no allowance. The interest is added to your other income and taxed at your top rate, the one that applies to your next dollar.
What does $3,000 of interest cost you?
Say you earn $3,000 in interest from a savings account or GIC. Here’s what our engine gives when it lands on top of taxable income of $60,000, with only the basic personal amount claimed.
| Province | Extra tax on $3,000 | You keep |
|---|---|---|
| Ontario | $889.50 | $2,110.50 |
| Alberta | $891.00 | $2,109.00 |
So about 30 cents of every interest dollar goes to tax at that income. On $40,000 in Alberta the same $3,000 costs $660. On $100,000 it costs $915.
Try your own income in the marginal tax rate calculator, which has an interest option. Then see what a rate is worth after tax in the GIC calculator.
Which accounts shelter savings from tax?
Three registered accounts are the usual answers. Their 2026 limits are below.
| Account | 2026 limit | What happens to the interest |
|---|---|---|
| TFSA | $7,000 new room | Tax-free, including on withdrawal |
| RRSP | $33,810 dollar limit | Untaxed inside, taxed when you withdraw |
| FHSA | $8,000 a year, $40,000 lifetime | Deduction going in, tax-free out for a qualifying first home |
The TFSA is the one to check first for plain savings. The CRA says interest, dividends and capital gains inside it aren’t taxed, even when you take money out. Your room is the sum of every year since you turned 18 and lived in Canada, minus what you’ve used, so your number is probably bigger than $7,000. The TFSA calculator works it out from your birth year.
The RRSP limit is 18% of last year’s earned income up to the dollar limit, less any pension adjustment. Your notice of assessment has your exact room. The FHSA calculator covers the first-home account.
Mistakes with savings and tax
The first is forgetting interest you never saw a slip for. A small account at a second bank is an easy one to miss. Report it anyway.
Is a few dollars of interest worth the fuss? It’s still income, and the rule doesn’t change with the amount, but the tax on it is tiny. The money that matters is in GICs and large balances.
The second is overfilling a TFSA. The data we checked shows a penalty of 1% per month on the excess. Check your room before you move a lump sum.
The third is thinking a higher rate always wins. A 4% GIC in a taxable account keeps about 2.8% for someone paying 30% on the interest, and a lower rate inside a TFSA could beat it. That’s your own maths to run, and the compound interest calculator makes it quick.
We didn’t compare banks or quote any current rates. Those move often and we couldn’t confirm any of them.
Where the numbers come from
Reporting rules are from the Canada Revenue Agency’s pages on line 12100 and T5 slips. TFSA rules and the $7,000 limit are from the CRA’s TFSA pages. RRSP, FHSA and TFSA amounts are from our data files, checked on 29 and 30 September 2026. Tax examples come from our calculator engine using 2026 federal, Ontario and Alberta rates. We have no connection with the CRA or any government.
Frequently asked questions
Do I pay tax on a savings account in Canada?
Yes, on the interest, unless the account is a TFSA or another registered account. It's reported as income on line 12100.
What if my bank didn't send a T5?
You still report the interest. The CRA says to report interest earned each year even without a slip.
What is the TFSA limit for 2026?
$7,000 of new room, added to any room you've carried forward.
Is there a tax-free amount of interest?
We found no separate interest allowance on the CRA pages. Interest is taxed as ordinary income.
Does a GIC in a TFSA pay tax?
No. The CRA says interest earned in a TFSA is generally tax-free, including on withdrawal.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.