Reporting partial bank interest income

[PeteH]

Hi,

What is the proper way of reporting a partial interest income earned but not received at year end ?

An example - a 31-day GIC starts December 15 and matures on January 14 (next year). Should I report the partial interest earned (but not received) from December 15 to December 31 (ie. 16 days) or can I report the full interest earned and received to the following year's tax return ?

Thanks,

[Maggie3]

Hello PeteH,

The income you report is based on the interest you earned during each complete investment year.

For example, if you made a long-term investment on July 1, 2021, report the interest that accumulated up until the end of June 2022 on your 2022 return even if you do not receive a T5 slip. Report the interest from July 2022 to June 2023 on your 2023 return.

For more information on this topic, please visit the CRA website:  https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12100-interest-other-investment-income/line-12100-bank-accounts-term-deposits-guaranteed-income-certificates-gics-other-similar-investments.html

[PeteH]

CRA states:  

For example, if you made a long-term investment on July 1, 2020, report  the interest that accumulated up until the end of June 2021 on your 2021 return even if you do not receive a T5 slip. Report the interest from July 2021 to June 2022 on your 2022 return.

To clarify - report July 1, 2020 to Dec 31, 2020 interested accumulated in 2020 return ? The CRA explanation is a bit confusing since its saying July 1, 2020 to June 30, 2021 report to 2021 return, so does that mean we don't report the interest portion from July 1, 2020 to Dec 31, 2020 in 2020 return ? 

Thanks again,

[Maggie3]

Hello PeteH,

In your example, you would not report the interest in 2020 because you probably would not have received any interest until your investment matured in July 2021.

To simplify, report interest when you receive a T5 slip.  Or if the interest received is under $50, you would not receive a T-slip, but you must report it when received. 

[AltaRed]

Agreed. Going back to the first post, no interest would be declared in 2022. It will all be declared in the 2023 tax year.

[rsk1957]

Just re-hashing this. 

So to confirm, if I took out a 1 year GIC on Jan 5, 2023, I don't have to declare any interest income for 2023?  As the GIC matures on Jan 5, 2024, I only have to declare the full interest earned in my 2024 tax return when I have receive my T5 from the bank.   This seems odd to me as the majority of the time duration of the GIC was in 2023.   I just don't want to make a mistake on my return for 2023 by not including any interest earned.   Thanks for any helpful replies..

[Maggie3]

Hello rsk1957,

If your GICs are held in a registered account such as a tax-free savings account (TFSA), the interest income earned is not taxable. 

If your GICs are held in a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF), the interest you earn is tax-deferred, meaning the interest you earn is not taxable as long as these earnings are not withdrawn. 

When you hold GICs in a non-registered account, the interest earned is fully taxable. 

Your GIC provider will issue a T5 tax slip—Statement of Investment Income—with details of your investment income in a non-registered account. Box 13 of the T5 tax slip will specify how much interest income you earned on your GIC. You must report this interest on your tax return for the year you receive the T5 slip.

Your GIC interest must be accrued at least once every year and taxed, even if it not paid to you or withdrawn.  Normally, if your interest is under $50, you may not receive a T5 slip, but you must report the interest received.

[rsk1957]

Okay, thank you.