Investment Income and Capital Gains Tax

Interest, dividends and capital gains all go on your personal return, but each follows its own rules and comes on its own slips. With capital gains, the cost of what you sold matters as much as the sale price.

Interest

Interest goes on line 12100 and usually shows up on a T5 slip (sometimes a T3). If the total is under $50 you may not get a T5, but you still have to report it. For a joint bank account, you generally report your share of the interest based on how much you put into the account, which is the question behind a T5 in one spouse's name.

With GICs and term deposits that pay out only at maturity, you can't wait until maturity to report. You report the interest earned in each complete investment year, even if you haven't received it and didn't get a slip. Make a long-term investment on July 1, 2024, and the interest earned to June 30, 2025 goes on your 2025 return.

Dividends from Canadian companies

Dividends from taxable Canadian corporations go on line 12000 as a grossed-up "taxable amount", which is more than the cash you received. The dividend tax credit (line 40425 federally, line 61520 provincially) then brings the tax back down. Your T5 or T3 shows both numbers. With no slip, the CRA's instructions for the 2025 tax year have you multiply eligible dividends by 138% and other-than-eligible dividends by 115%. Foreign dividends don't qualify for the credit.

Capital gains and the inclusion rate

Your capital gain is what you sold for, minus your adjusted cost base (ACB) and the costs of selling. ACB is usually what you paid plus costs of buying, like commissions and legal fees. If you bought the same shares or fund units at different prices over time, your ACB is the average cost, recalculated with each purchase.

Only part of the gain is taxed. The inclusion rate for 2025 is one-half, so half of the gain is added to your income as a taxable capital gain. The federal government had proposed raising the rate to two-thirds on some gains, but that increase was cancelled, so the one-half rate stays in place.

Capital losses and superficial losses

Half of a capital loss is an allowable capital loss. It reduces your taxable capital gains for the year, but not your other income. Whatever is left over becomes a net capital loss, which you can carry back to any of the three previous years (using Form T1A, not an amended return) or carry forward to any future year. More on that in what happens with a capital loss.

A loss is superficial, and you can't deduct it, if you or someone affiliated with you (your spouse, or a corporation either of you controls, for example) buys the same or identical property within 30 calendar days before or after the sale and still owns it 30 days after. The denied loss is usually added to the ACB of the property you bought back, so it isn't lost for good.

Slips to expect

Selling your home

If a home was solely your principal residence for every year you owned it, you don't pay tax on the gain. You still have to report the sale and designate it on Schedule 3 and Form T2091(IND). Since 2016, the CRA only allows the exemption if you report it. If you forget, ask the CRA to amend that year's return, though a penalty may apply. A family can designate only one home per year. A home you owned for less than 365 consecutive days before selling may count as a flipped property, unless the sale was due to certain life events. There's also a common rumour about being taxed on a big gain on your home. If part of the home was rented, see rental income tax.

How we help

Investment income goes on your personal return. It takes extra work, so it's quoted on top of the base price, and we give you the number before any work starts. Every tax client gets our CCNotes summary, a plain-English breakdown of what went into the return.