T3 Trust Income Slip Explained
What a T3 slip reports, where each box goes on your return, and why box 42 changes your cost base.
The short version
- A T3 reports income passed to you by a trust: most often a mutual fund, an ETF or an income trust held outside a TFSA or RRSP, and sometimes an estate or family trust.
- Box 21 (capital gains) goes on Schedule 3, line 17600. Box 26 (other income) goes on line 13000. The taxable dividends in boxes 32 and 50 go on line 12000.
- Box 42 isn't income. It's a return of capital that lowers your cost base, and you'll pay for it later if you ignore it.
- T3 slips arrive late: generally by March 31 for a trust with a calendar year end. Don't file in early March if you own funds outside registered accounts.
- Reinvested distributions are still taxable, and they raise your cost base.
T3 Slip Explained: Mutual Funds, ETFs and Trust Income
The T3 is the slip that shows up after you've already filed. You invested $20,000 in a balanced fund, never took a cent out, and still owe tax on $1,400 of “distributions.” Welcome to trust income. The fund passed its income to you on paper, reinvested it in more units, and CRA taxes you as if you'd received it, because legally you did.
Want the slip read for you? Upload it to the tax document analyzer, and it lists each box and the line it goes on.
The T3 Boxes and Where They Go
| Box | What it is | Where it goes |
|---|---|---|
| 21 | Capital gains | Schedule 3, line 17600 (half is taxable) |
| 22 | Lump-sum pension income | Line 13000 |
| 23 | Actual amount of dividends other than eligible dividends | Not entered; box 32 is used |
| 24 | Foreign business income | Line 13500 and form T2209 |
| 25 | Foreign non-business income | Line 12100 and form T2209 |
| 26 | Other income | Line 13000 |
| 30 | Capital gains eligible for the capital gains deduction | Schedule 3, as the footnotes direct |
| 31 | Qualifying pension income | Line 11500, and toward the pension income amount (line 31400) |
| 32 | Taxable amount of dividends other than eligible dividends | Lines 12010 and 12000 |
| 34 | Foreign non-business income tax paid | Foreign tax credit, form T2209 |
| 39 | Dividend tax credit on box 32 | Line 40425 |
| 42 | Amount resulting in cost base adjustment (return of capital) | Not income; adjust your cost base |
| 49 | Actual amount of eligible dividends | Not entered; box 50 is used |
| 50 | Taxable amount of eligible dividends | Line 12000 |
| 51 | Dividend tax credit on box 50 | Line 40425 |
Most tax software asks for the boxes as printed and does the routing. The two mistakes to avoid: entering the actual dividends (boxes 23 and 49) instead of the taxable amounts (32 and 50), and treating box 42 as income. The gross-up behind boxes 32 and 50 works the same way as on a T5; see T5 slip explained.
Box 42: The Box That Bites Later
Box 42 is a return of capital: the fund handed back part of your own money. It isn't taxed now. Instead, it reduces the adjusted cost base of your units, which makes the capital gain bigger when you sell. If you never track it, you'll overstate your cost and understate your gain. CRA's matching program doesn't catch that right away, but an audit does.
Reinvested distributions work the other way. Every reinvested dollar you were taxed on gets added to your cost base. Forget them and you pay tax twice: once when the distribution is taxed and again when you sell. On a fund held for ten years, that can be thousands of dollars of gain that never existed.
So keep every T3 and every year-end statement for funds held outside a TFSA or RRSP. Your adviser's “book value” is a good start, but it isn't always your tax cost. Our capital gains tax guide explains the adjusted cost base, and the capital gains calculator runs the sale.
T3 that doesn't make sense?
Upload it. The Tax Document Analyzer reads every box and footnote, tells you where each amount goes, and flags box 42 so it doesn't get treated as income.
When T3 Slips Arrive
A trust with a December 31 year end generally has 90 days to file and send slips, so T3s can arrive as late as March 31. T5s and T4s come by the end of February. If you file the first week of March and a T3 arrives three weeks later, you'll be changing your return. If you own funds outside registered accounts, wait for the T3s or check My Account first. Already filed? See how to change your tax return.
T3 Slips From an Estate or Family Trust
An estate or family trust that pays or allocates income to beneficiaries issues T3s too. The income on the slip is taxed in the beneficiary's hands instead of the trust's. Money you inherit from an estate isn't taxable by itself; income the estate earned and passed to you can be. The difference is explained in non-taxable income in Canada.
T3 Inside a TFSA, RRSP or RRIF?
No slip. Distributions earned inside registered accounts aren't reported each year. Funds that pay large taxable distributions are often better held inside a TFSA or RRSP, which is a planning point worth raising before you buy, not after. See what counts as taxable income for the broader picture.
Three T3 Rules of Thumb
- Wait for March 31 if you own non-registered funds.
- Track your cost base yearly: add reinvested distributions, subtract box 42.
- Enter taxable dividend amounts, not actual ones.
Before you file, Return Check compares your T3s with your return and flags missing slips and dividends in the wrong box.
T3 Slip Questions
What is a T3 slip?
A T3, Statement of Trust Income Allocations and Designations, reports income a trust allocated to you, most often from a mutual fund, ETF or income trust held outside a registered account, or from an estate or family trust.
Where does T3 box 21 go on my tax return?
Box 21, capital gains, goes on line 17600 of Schedule 3. Half of the gain is taxable.
Is T3 box 42 taxable?
No. Box 42 is a return of capital. It is not income in the year received, but it reduces your adjusted cost base, which increases the capital gain when you sell.
When do T3 slips come out?
A trust with a December 31 year end generally has 90 days to issue T3 slips, so they can arrive as late as March 31.
Are reinvested mutual fund distributions taxable?
Yes. Distributions are taxable in the year allocated even if they are reinvested in new units. The reinvested amount is added to your adjusted cost base.
Sources: CRA, T3 slip information for individuals; How to complete the T3 slip; T3 Trust Guide (T4013). Checked October 2026. Box 30 and box 45 depend on footnotes and the province; follow the slip's instructions.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.