Investment Taxes in Canada
How interest, dividends, capital gains and crypto are taxed in Canada, which accounts change the tax, and the rules that catch investors.
The short version
- Investment income is taxed three different ways in Canada (four, if CRA decides your trading is a business; see capital vs business income): interest in full, Canadian dividends with a dividend tax credit, and capital gains at half.
- Inside a TFSA, nothing is taxed; inside an RRSP, nothing is taxed until you withdraw. Using them first is the biggest tax decision most investors make.
- Your cost (adjusted cost base) is the average cost of identical investments, including fees. Losses can offset gains, but the superficial loss rule blocks selling and buying back within 30 days.
- Crypto, foreign investments and rental property each have their own rules; the guides below cover them.
- Foreign property costing more than $100,000 in total must be reported each year on form T1135.
Investment Taxes in Canada
Two investors earn the same $10,000. One pays almost nothing, the other pays nearly half. The difference isn't the stock picks, it's the type of income and the account it landed in. Interest is taxed hardest, Canadian dividends and capital gains much less, and anything in a TFSA not at all. Here's the map, and where to go for the details.
How Each Type of Income Is Taxed
| Income | How it's taxed | Top Ontario rate (2026) |
|---|---|---|
| Interest (savings, GICs, bonds) | Fully, like salary | 53.53% |
| Eligible Canadian dividends | Grossed up 38%, then the dividend tax credit | 39.34% |
| Capital gains | Half is taxable | about 26.8% |
| Foreign dividends | Fully, with a credit for foreign tax withheld | 53.53% |
| Anything in a TFSA | Not taxed | 0% |
| RRSP or RRIF withdrawals | Fully, when withdrawn | 53.53% |
Slips and lines are on the T5 slip and the T3 slip; gains on capital gains tax.
Which account should each investment go in?
Tell the assistant your income, province, TFSA and RRSP room and what you hold. It explains where interest, dividends and growth investments are taxed least for you.
Guides by Investment
| Investment | Guide |
|---|---|
| Cryptocurrency | Crypto taxes in Canada |
| Stocks, ETFs and funds | Stock investment taxes and ETF and mutual fund taxes |
| Real estate | Real estate tax and rental property tax |
| Shares of your own company | Dividends from a corporation |
| Which account first | TFSA vs RRSP vs non-registered |
| U.S. stocks and ETFs | Taxes on U.S. stocks for Canadians |
| Cost of your investments | Adjusted cost base and the ACB calculator |
| Losses | Capital losses |
| Tax withheld by another country | Foreign tax credit |
| Inherited investments | Inheritance tax |
Accounts That Change the Tax
- TFSA: growth and withdrawals tax-free; room of $7,000 for 2026; see TFSA.
- RRSP: deduct now, pay tax on withdrawal; see RRSP.
- FHSA: deductible and tax-free for a first home; see FHSA.
- RESP: grows tax-sheltered, with government grants; see having a baby.
Rules That Catch Investors
- Superficial losses: sell at a loss and you, your spouse or your company buy the same thing within 30 days before or after, and the loss is suspended.
- Average cost: your cost is the average of all identical units, not the specific lot you think you sold.
- Foreign currency: gains are calculated in Canadian dollars at the exchange rates on the purchase and sale dates.
- T1135: foreign property costing over $100,000 in total (including foreign shares held in a Canadian non-registered account) must be reported yearly; see form T1135.
- Attribution: investing money given to a spouse or minor child can send the income back to you; see marriage and taxes.
Investment Tax Questions
How is investment income taxed in Canada?
Interest and foreign dividends are fully taxable. Eligible Canadian dividends get a gross-up and a dividend tax credit, and only half of capital gains is taxable. Income in a TFSA is not taxed, and RRSP income is taxed only on withdrawal.
What is the capital gains inclusion rate in Canada?
50%. Half of a capital gain is added to your income.
Do I pay tax on investments in a TFSA?
No, as long as you stay within your contribution room and hold qualified investments.
What is the superficial loss rule?
If you sell an investment at a loss and you or an affiliated person buy the same investment within 30 days before or after, the loss is denied for now and added to the cost of the new purchase.
Do I have to report foreign investments?
Yes, on form T1135 if the total cost of your specified foreign property is more than $100,000 at any time in the year, and the income they earn is reported on your return.
How is interest income taxed in Canada?
Interest is fully taxable at your marginal rate, reported on a T5 slip. Interest on multi-year GICs and similar investments is taxed each year as it accrues, even if paid at maturity. Holding interest-bearing investments in a TFSA or RRSP shelters it.
Sources: CRA, Completing Schedule 3. Checked October 2026. Top rates come from our 2026 Ontario rules engine; the capital gains rate is half the top rate. Details and sources for each topic are on the linked guides.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.