Is GIC Interest Taxable in Canada? How GIC Income Is Taxed

GIC interest is fully taxable in Canada. Unlike capital gains (only partly included in income) or eligible dividends (grossed up, then offset by the dividend tax credit), interest is taxed as ordinary income at your full marginal rate with no special treatment.

This page explains how GIC interest is taxed, when it has to be reported, what happens with multi-year GICs, and how registered accounts remove or defer the tax. It is part of the GIC hub; for how GICs work in general, see the GIC guide.

GIC Interest Is Fully Taxable

GIC interest is treated as interest income for Canadian tax purposes: the same category as savings account interest, bond interest, and most other fixed-income returns.

At a 40% marginal rate, $1,000 in GIC interest costs $400 in federal and provincial income tax. The same amount received as eligible dividends from a Canadian corporation is taxed at a lower rate because of the dividend tax credit, and capital gains are only partly included in income; the comparison further down works through one example.

When GIC Interest Is Taxable

1-Year GICs

For a 1-year GIC that pays interest at maturity, you report the interest for the year the GIC matures, and your bank issues a T5 slip by the last day of February of the following year.

Example: You buy a 1-year GIC on March 1, 2026, for $10,000 at 4.5%. The GIC matures March 1, 2027, paying you $10,450. You receive a T5 from your bank by the end of February 2028 showing $450 in Box 13, reported on your 2027 T1 return filed in spring 2028. The interest belongs to 2027 because the GIC’s first anniversary, which is also its maturity date, falls in 2027.

Multi-Year GICs: the Annual Accrual Rule

For GICs with terms longer than 12 months, the annual accrual rule in subsection 12(4) of the Income Tax Act requires you to report the interest that has accrued up to each anniversary of the GIC’s purchase, on the return for the calendar year in which that anniversary falls, even if you have not yet received it.

A 3-year GIC at 4.0% on $10,000:

• Year 1: $400 interest accrues; reported for the year of the first anniversary, T5 issued
• Year 2: $416 interest accrues (compounding); reported for the year of the second anniversary, T5 issued
• Year 3: $433 accrues; reported for the year the GIC matures

You pay tax each year on accrued interest even though you cannot access the money until maturity. This is the main tax disadvantage of non-redeemable multi-year GICs held outside registered accounts.

What the T5 Slip Shows

Your bank or trust company issues a T5 Statement of Investment Income by the last day of February for each year your GIC earns interest.

GIC interest appears in Box 13. This amount is entered on Line 12100 of your T1 General tax return (Interest and Other Investment Income).

If you earned less than $50 in interest from a single institution in a year, the institution may not issue a T5, but you still have to report the income.

Strategies to Reduce Tax on GIC Interest

Strategy 1: GICs in a TFSA

Interest earned inside a TFSA is tax-free: no T5 slip, no reporting and no tax when it is withdrawn.

TFSA contribution room for 2026:

• Annual limit: $7,000
• Cumulative room since 2009: up to $109,000, depending on when you became eligible

The TFSA hub’s page on holding a GIC inside a TFSA compares a TFSA GIC with a non-registered one year by year, and the TFSA contribution limit page covers room.

Strategy 2: RRSP GICs (Tax-Deferred)

An RRSP defers tax on GIC interest until withdrawal. A $10,000 RRSP GIC earning 4.5% for 5 years accumulates about $2,462 in compound interest with no tax along the way. Tax is paid when the money comes out, often in retirement at a lower marginal rate.

This is most valuable for high-income earners in their peak earning years who expect to be in a lower bracket in retirement.

Strategy 3: RRIF GICs

GICs held inside a RRIF work the same way as RRSP GICs: tax-deferred. They are commonly used as part of a GIC laddering strategy in retirement: stagger GIC maturities to align with annual RRIF minimum withdrawals.

Strategy 4: Spousal Attribution

If your spouse or common-law partner is in a lower tax bracket, GICs bought with their own money and held in their name are taxed at their rate. If you give or lend them the money instead, the attribution rules generally tax the interest back to you. A spousal RRSP is the usual route for splitting retirement income.

GIC Interest vs Other Investments: After-Tax Comparison

At a 31.48% combined federal and Ontario marginal rate (an Ontario earner at $100,000 of income, where Ontario’s first surtax band applies; adding the base federal and Ontario bracket rates alone would give 29.65%):

Eligible dividends at the same income would also be taxed at a lower rate than interest, because of the dividend tax credit; the exact figure depends on the provincial credit and surtax.

In this example the TFSA keeps the full 4.50%, while the same GIC in a non-registered account keeps 3.08%. Outside registered accounts, capital gains and eligible dividends are taxed more lightly than interest, which is why interest-paying investments are often the first to go into a TFSA or RRSP. A GIC’s tax does not depend on whether it is cashable or non-redeemable, and for GICs held by a corporation, see business GICs.

Related Guides

• GIC hub: rates, types and laddering
• Are GICs Safe in Canada?
• Cashable vs Non-Redeemable GICs
• GIC vs HISA
• TFSA contribution limit
• RRSP vs TFSA for Savings