What Income Is Not Taxable in Canada?
CRA's list of income you don't pay tax on: lottery wins, gifts, inheritances, TFSA withdrawals, the CCB and more.
The short version
- CRA's own list of untaxed amounts: lottery winnings, most gifts and inheritances, most life insurance paid on a death, most TFSA withdrawals, the Canada Child Benefit and the Canada Groceries and Essentials Benefit, most strike pay, and provincial compensation for crime or car-accident victims.
- Your home is usually tax-free when you sell it, but you still have to report the sale.
- The catch: the interest or growth you earn on tax-free money is taxable, unless it's inside a TFSA.
- Workers' comp, social assistance and the Guaranteed Income Supplement aren't taxed, but they still go on the return.
Non-Taxable Income in Canada: What You Don't Pay Tax On
Canada taxes nearly everything, so the list of things it doesn't tax is worth knowing by heart. It's also the list people most often get wrong in the hopeful direction. “My uncle gave it to me” covers a cheque for a birthday. It doesn't cover the $40,000 your uncle paid you to renovate his kitchen.
For the other side of the ledger, see what counts as taxable income.
CRA's List of Amounts You Don't Report
1. Lottery and Gambling Winnings
Lottery winnings of any size are not taxable, unless the prize is really income from a job or a business, or a prize for achievement. Casual gambling winnings are treated the same way. Professional gamblers, who make a business of it, are a different story, and a rare one. Once the winnings sit in a bank account, the interest they earn is taxable.
2. Gifts and Inheritances
Most gifts and inheritances aren't taxable to the person receiving them. Canada has no gift tax and no inheritance tax. The tax happens elsewhere: on death, the person who died is treated as selling their property at fair market value, and their final return pays the tax on the gain before the estate is divided (see capital gains tax in Canada). Giving away property that has gone up in value works the same way: the giver is treated as selling it.
Gifts from an employer are different. Cash and gift cards are always a taxable benefit. Non-cash gifts and awards are tax-free up to $500 a year in total, under CRA's administrative policy.
3. Life Insurance Paid on a Death
Most amounts from a life insurance policy after someone dies are not taxable. A death benefit from the person's employer is a different thing: up to $10,000 of it is tax-free, and the rest is taxable.
4. TFSA Withdrawals
Most amounts taken out of a tax-free savings account aren't taxable, including all the growth. That's the whole point. Qualifying withdrawals from a first home savings account to buy a first home are tax-free as well. RRSP withdrawals are taxable (the RRSP tax savings calculator shows the other side of that deal), except Home Buyers' Plan and Lifelong Learning Plan withdrawals, which you pay back.
5. Federal and Provincial Benefit Payments
The Canada Child Benefit, the Canada Groceries and Essentials Benefit (formerly the GST/HST credit) and related provincial and territorial benefits aren't taxable. The amounts are in our guide to Canadian tax credits. You still have to file to receive them; see do I have to file taxes in Canada.
6. Compensation for Crime and Car Accident Victims
Compensation from a province or territory to a victim of a criminal act or a motor vehicle accident is not taxable. Damages for a personal injury are also generally not taxable, though the investment income they earn later usually is.
7. Strike Pay
Most strike pay from your union is not taxable, even if you walked the picket line for it.
8. War Veterans' Disability Payments
Amounts paid by Canada or an allied country for the disability or death of a war veteran due to war service are not taxable (for an allied country's payment, only if it isn't taxable there).
9. Income Exempt Under the Indian Act
Income of a status Indian that is situated on a reserve is exempt under section 87 of the Indian Act. Where income is “situated” can be complicated, especially for employment and business income; CRA publishes guidelines.
Got money and not sure if it's taxable?
Tell the assistant what it was and who paid it. It checks CRA's list and tells you if it's taxable, which line it goes on if it is, and why.
Tax-Free, But It Still Goes on the Return
Some money isn't taxed but still has to be reported, because it changes your net income, which drives your benefits:
- Workers' compensation (line 14400), social assistance (line 14500) and the Guaranteed Income Supplement (line 14600). They're added in, then deducted at line 25000.
- Scholarships and bursaries. Fully exempt for a full-time qualifying student; a part-time student exempts $500 plus tuition and program materials. Elementary and secondary school scholarships aren't taxable at all. The details are on the T4A slip page, since that's where scholarships show up.
- Child support. Not taxable to the parent receiving it, and not deductible for the parent paying it, under agreements made after April 1997. Spousal support is the opposite: taxable to the receiver, deductible for the payer.
Your Home: Tax-Free, Paperwork Included
The gain on selling your principal residence is usually fully exempt. But since 2016, every sale must be reported on Schedule 3 and Form T2091(IND), even when no tax is owed. Skip it and CRA can deny the exemption or charge a penalty. Owning two places, a house and a cottage, means choosing which one to shelter for which years. Our guide to the principal residence exemption for a home and cottage explains the plus-one rule.
Sold a home or cottage? Keep the most gain tax-free
The home and cottage SmartFile picks the best split of years between your properties and fills in Form T2091(IND).
Three Ways People Get Caught
- Calling business income a gift. If you did work for it, it's income, even if the payer is family.
- Forgetting the interest. The inheritance was tax-free; the GIC you bought with it isn't.
- Over-contributing to a TFSA. Withdrawals are tax-free, but putting back more than your room costs 1% a month on the excess.
Not sure your return got it right? Return Check reads it before you file and flags income that's missing, or reported when it shouldn't be.
Non-Taxable Income Questions
Are lottery winnings taxable in Canada?
No. Lottery winnings of any amount are not taxable, unless the prize is really income from employment, a business or property, or a prize for achievement. Interest earned on the winnings afterward is taxable.
Do I pay tax on an inheritance in Canada?
No, the person receiving an inheritance does not pay tax on it. Instead, the deceased person's final return pays tax on gains as if their property was sold at fair market value just before death.
Is the Canada Child Benefit taxable?
No. The Canada Child Benefit, the Canada Groceries and Essentials Benefit and related provincial benefits are not taxable and are not reported on your return.
Are TFSA withdrawals taxable?
Most are not. Withdrawals, including all the investment growth, are generally tax-free, and the amount withdrawn is added back to your contribution room the following January.
Is life insurance taxable in Canada?
Most amounts received from a life insurance policy after someone's death are not taxable. An employer death benefit is different: up to $10,000 is tax-free and the rest is taxable.
Sources: CRA, Amounts that are not reported or taxed; Line 13000 Other income (death benefits); Line 13010 Scholarships and bursaries; Principal residence and other real estate. Employer gift policy from CRA's Employers' Guide T4130. Checked October 2026. Indian Act situs rules are summarized only; they depend on the facts.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.