Interest from a Guaranteed Investment Certificate is taxed as ordinary income in Canada, added to your other income and taxed at your marginal rate — unless the GIC is held inside a registered account like a TFSA, RRSP, or FHSA. That is the short version of how GIC interest is taxed in Canada. The longer version has a few wrinkles that catch people off guard, starting with the fact that you owe tax on the interest every year, even when none of it has actually been paid out to you.
You Report Interest Every Year, Not at Maturity
The most common mistake GIC holders make is assuming they only owe tax when the certificate matures and the money hits their account. That is not how it works. Under subsection 12(4) of the Income Tax Act, you must include accrued interest in your income each year on the “anniversary day” of the investment contract, whether or not you received a payment.1Justice Laws Website. Income Tax Act RSC 1985, c. 1 (5th Supp.) – Section 12
The anniversary day is the yearly anniversary of the date the GIC was issued. Buy a three-year GIC on March 15, 2024, and your anniversary days fall on March 15 of 2025, 2026, and 2027. The interest that accrued up to each of those dates goes on the tax return for the year that anniversary falls in. The CRA spells this out for compound GICs specifically: even though the interest is reinvested rather than paid to you, you report the amount earned during each complete investment year.2Canada Revenue Agency. Line 12100 – Interest and Other Investment Income
Keep your purchase date, interest rate, and compounding method on hand so you can verify the accrual amount your financial institution reports.
How Much Tax You Pay on a Non-Registered GIC
A GIC held in a regular investment or savings account gets no special tax treatment. Every dollar of interest is added to your other income for the year and taxed at your marginal rate. For 2026, federal rates start at 14% on the first bracket and climb to 33% on income above $258,482, with provincial or territorial tax stacked on top. Interest income receives none of the preferential treatment that dividends or capital gains get — you pay tax on the full amount.
Your bank does not withhold tax on GIC interest the way an employer withholds from a paycheque. If you hold a sizeable GIC outside a registered account, set money aside for the tax bill so you are not surprised in April.
Registered Accounts Change Everything
The account wrapper around the GIC matters more than the GIC itself. Three registered accounts can hold GICs, and each is treated differently.
- RRSP: Contributions are tax-deductible, and interest compounds inside the plan without triggering an annual tax bill. You pay tax only when you withdraw, at which point the withdrawal is added to your income for that year.3Canada Revenue Agency. Registered Retirement Savings Plan (RRSP)
- TFSA: Contributions are not deductible, but the interest a GIC earns inside a TFSA is completely tax-free, and withdrawals are tax-free too. TFSA income never appears on your return.4Canada Revenue Agency. What Is a TFSA
- FHSA: The First Home Savings Account combines the two. Contributions are deductible like an RRSP, and qualifying withdrawals used to buy a first home come out tax-free like a TFSA.5Canada Revenue Agency. First Home Savings Account (FHSA)
Because interest is taxed at the highest effective rate among investment income types, a TFSA is often the most tax-efficient home for a GIC. Sheltering the interest entirely eliminates the disadvantage. The tradeoff is contribution room; once your TFSA is full, additional GICs land in a non-registered account where every dollar of interest is taxable.
Market-Linked, Foreign Currency, and Joint GICs
A market-linked GIC ties part of the return to a stock index or basket of assets. If the GIC guarantees a minimum annual interest rate, you report that guaranteed portion each year under the anniversary day rule. The variable portion is not known until maturity, so it is reported in the year the GIC matures. Regardless of how the return is calculated, all income from a market-linked GIC is treated as interest, not capital gains. That distinction matters: interest is taxed at your full marginal rate, while only half of a capital gain is taxable. The equity-linked component does not qualify for capital gains treatment.
A GIC denominated in U.S. dollars or another foreign currency creates two tracking jobs. The interest itself is converted to Canadian dollars and reported like any other GIC interest, using the Bank of Canada exchange rate on the date the interest was earned or the average annual rate. Separately, when the GIC matures or you cash it, any change in the exchange rate between purchase and payout can create a foreign exchange gain or loss. The CRA treats non-negotiable term deposits and GICs as “funds on deposit,” so the gain or loss is calculated when the foreign currency is ultimately converted or used. For individuals, only the net foreign exchange gain or loss exceeding $200 in a year is taxable or deductible as a capital gain or loss.6Canada Revenue Agency. ARCHIVED – Foreign Exchange Gains and Losses
Joint GICs are not split 50/50 by default. Each holder reports the share of interest matching the proportion of funds they contributed. If one spouse put in 70% of the money, that spouse reports 70% of the interest. The T5 slip is usually issued under one holder’s Social Insurance Number, which can be confusing, but the reporting still follows contribution. Splitting the income in a more favourable ratio to lower the combined tax bill is exactly what the CRA’s attribution rules exist to catch.
Your T5 Slip and Line 12100
Your financial institution sends a T5 Statement of Investment Income summarizing interest earned during the year. Box 13 reports interest from Canadian sources, and that is where your GIC interest lands.7Canada Revenue Agency. T5 Statement of Investment Income – Slip Information for Individuals
Institutions are not required to issue a T5 when the total interest paid to you for the year is under $50.8Canada Revenue Agency. When Do You Have to Prepare a T5 Slip You still have to report the income. Check your statements or online banking and calculate it yourself.2Canada Revenue Agency. Line 12100 – Interest and Other Investment Income
Compare Box 13 against your own records before filing. If the figure looks wrong, ask your bank for an amended slip; the institution is responsible for preparing the corrected T5 and sending you two copies.9Canada.ca. Amending, Cancelling, Adding, or Replacing T5 Slips Sorting a mistake out before you submit is far easier than correcting the return afterward.
The interest itself goes on Line 12100 of your T1 return. That line captures all interest and investment income, so include savings accounts, bonds, and anything else alongside your GIC amounts.2Canada Revenue Agency. Line 12100 – Interest and Other Investment Income Most tax software imports T5 data directly through the CRA’s Auto-fill service, or you can enter each slip by hand. Either way, confirm that Line 12100 matches the sum of every T5 Box 13 amount plus any small amounts you calculated yourself. The CRA already has copies of your T5s, so any mismatch will surface.
What Happens if You Don’t Report
Missing a small T5 is easy to do, especially with GICs at several institutions. Repeated omissions are expensive. If you fail to report $500 or more of income and you also failed to report $500 or more on any return in the three preceding tax years, the CRA applies a penalty equal to the lesser of 10% of the unreported amount or 50% of the additional tax owing on that amount.10Justice Laws Website. Income Tax Act RSC 1985, c. 1 (5th Supp.) – Section 163
On top of the penalty, the CRA charges compound daily interest on any unpaid tax. The prescribed rate on overdue taxes has been 7% throughout 2026.11Canada Revenue Agency. Interest Rates for the First Calendar Quarter The rate is set quarterly and applies from the filing deadline until the balance is paid.
If you find missed GIC interest on a past return, the CRA’s Voluntary Disclosures Program lets you come forward before the agency contacts you. An accepted application under the general track typically brings full relief from penalties and 75% relief from the interest that would otherwise apply.12Canada Revenue Agency. Changes to the Voluntary Disclosures Program Fixing the problem yourself is cheaper than waiting for the CRA to find it.