If you hold mutual funds or ETFs outside a registered account, you’ll receive a T3 slip reporting the income the fund distributed to you, even if you didn’t sell a single unit. The fund’s own trading generates capital gains, dividends and interest that are allocated to unitholders and taxable in the year they’re distributed, whether you took them in cash or reinvested them. Unlike a T5, one T3 can carry several income types from a single fund in a single year, and each is taxed differently.
| Feature | Details |
|---|---|
| Full name | Statement of Trust Income Allocations and Designations |
| Issued by | Trusts (mutual funds, ETFs, REITs, income trusts, estates) |
| Reports | Income allocated to you from the trust |
| Due date | Last day of March (90 days after the trust’s year-end) |
That later deadline is why T3s are usually the last slips to arrive; the tax slips table compares it with the other slips.
Which funds issue a T3
| Fund type | Issues a T3? | Notes |
|---|---|---|
| Canadian mutual funds (trust structure) | Yes | The most common T3 source |
| Canadian ETFs (trust structure) | Yes | For example iShares, Vanguard Canada and BMO ETFs |
| Real estate investment trusts (REITs) | Yes | A mix of income types, often including return of capital |
| Income trusts | Yes | Less common since the 2011 tax change |
| Corporate-class mutual funds | No, a T5 instead | Structured as a corporation, not a trust |
| US-listed ETFs held in Canada | No | No Canadian slip; report the foreign income yourself |
| Estates and testamentary trusts | Yes | Issued to beneficiaries |
T3 boxes and where they go
| Box | Description | T1 line | Tax treatment |
|---|---|---|---|
| 21 | Capital gains | Schedule 3, line 17400 | 50% inclusion |
| 23 | Actual amount of dividends other than eligible | Not entered | Used for Box 32 |
| 32 | Taxable amount of dividends other than eligible | Line 12010 | Grossed-up amount |
| 39 | Dividend tax credit for dividends other than eligible | Line 40425 | |
| 49 | Actual amount of eligible dividends | Not entered | Used for Box 50 |
| 50 | Taxable amount of eligible dividends | Line 12000 | Grossed-up amount; dividend tax credit applies |
| 51 | Dividend tax credit for eligible dividends | Line 40425 | |
| 24 | Foreign business income | Line 12100 | Convert to Canadian dollars; foreign tax credit may apply |
| 25 | Foreign non-business income | Line 12100 | Convert to Canadian dollars; foreign tax credit may apply |
| 33 | Foreign business income tax paid | Form T2209 | Withholding paid to a foreign government |
| 34 | Foreign non-business income tax paid | Form T2209 | Withholding paid to a foreign government |
| 26 | Other income (includes interest) | Line 13000 | Full inclusion |
| 30 | Capital gains eligible for deduction | Schedule 3 | For lifetime capital gains exemption dispositions |
| 42 | Amount resulting in cost base adjustment (return of capital) | Not reported as income | Reduces your cost base |
For dividends, you enter the taxable amounts (Boxes 50 and 32) and claim the credits in Boxes 51 and 39; the dividend tax credit guide explains why the taxable amount is higher than the cash paid. For foreign tax in Boxes 33 and 34, complete Form T2209 and claim the credit on line 40500, as the foreign tax credit guide shows.
An ETF’s T3: what the components look like
A balanced Canadian ETF might issue a single T3 containing several box types:
| T3 component | Example amount | Box |
|---|---|---|
| Eligible dividends (Canadian stocks) | $82.00 | Box 49/50 |
| Interest income (bond portion) | $145.00 | Box 26 (other income) |
| Capital gains (portfolio turnover) | $28.00 | Box 21 |
| Foreign income (US/international) | $64.00 | Box 25 |
| Return of capital | $15.00 | Box 42, a cost base reduction |
Each component is taxed at its own rate, which is why the T3 breaks them out. Typical patterns by fund type:
| Fund type | Common distributions |
|---|---|
| Canadian equity ETF or fund | Eligible dividends (Box 49/50) |
| US equity ETF | Foreign income (Box 25) |
| Bond ETF or fund | Interest (Box 26) |
| Balanced fund | A mix of the above |
| REIT | Often return of capital (Box 42), plus interest, capital gains and dividends |
Reinvested distributions still count
If you’re enrolled in a distribution reinvestment plan (DRIP), your distributions buy new units instead of being paid in cash. That doesn’t exempt them from tax:
- The full distribution appears on your T3.
- You report and pay tax on it in the year it is distributed.
- The reinvested amount increases your cost base in the fund.
Return of capital (Box 42)
Box 42 isn’t income, so nothing from it goes on your return this year. It is treated as a return of your own money, and it reduces your adjusted cost base, so the capital gain is larger when you eventually sell. Reinvested distributions work the other way and raise it. If neither is tracked, the gain you report at sale will be wrong: too low if return of capital is missed, and too high (taxing the same income twice) if reinvested distributions are missed. The ACB guide shows how to keep the running total.
Late T3 slips
Trusts have until the end of March, and the slips from large fund families often arrive in mid-to-late March, so filing in early February can leave T3 income off your return and lead to a reassessment with interest. CRA My Account and Auto-fill my return list T3s as the CRA receives them; the CRA My Account guide explains how to check.
| Situation | What to do |
|---|---|
| The T3 arrives after you filed | File an adjustment (T1-ADJ) for the year the T3 relates to |
| The T3 still hasn’t arrived near the filing deadline | File on time to avoid a late-filing penalty, then adjust when it arrives |
| The slip never arrives | Contact the fund company |
| The amounts look wrong | Check them against your account statements |
T3 or T5: which slip for which investment
| Investment type | Slip you get |
|---|---|
| Bank savings account | T5 |
| Bank mutual fund (trust structure) | T3 |
| Individual stock | T5 |
| ETF (trust structure) | T3 |
| REIT | T3 |
Tax software tips
| Tip | Details |
|---|---|
| Enter exactly | Match each box precisely |
| Multiple T3s | Some software adds them together for you |
| Auto-import | Auto-fill my return or a broker import |
| Check your cost base | Software may not track return of capital |