Personal Finance

GIC interest tax

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  • Jan 23rd, 2019 5:18 pm
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Deal Addict
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Jul 25, 2008
2042 posts
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Ottawa

GIC interest tax

I like to find out how do you report interest earned on a term GIC.

Example

I started a GIC in Augest. So on Dec31st, it will have 4 month interest. It is more than 50$.
I know Bank will send me me a T5 for the 4 months.

Now my question
At the end of 2019, I will have 8 months of interest paid.

Will the T5 issue by the bank for the coming yr be the whole term or just the 8 months.?
14 replies
Member
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Jan 7, 2019
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Interest is taxed at 100% of your marginal tax rate, so whatever you've earned on the GIC, it'll be taxed at the highest bracket.
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Deal Addict
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Jul 25, 2008
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Ottawa
So, will I be paying full amount of interest expected for the 12 months instead of only 4 months at the the end of the year?

l1234|56789012|
-------- ^dec31st.. tax return. does bank give me 4 months or 12 months statements??

The Marginal Tax rate is high.
Deal Expert
Mar 25, 2005
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The T5 will report only what was paid in the calendar year, 2018 and 2019. If the GIC is only paid once at maturity, all of it will be in 2019.
Deal Addict
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Jul 25, 2008
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thx...
so I won't get T5 on 2018?
Do I still have post accrued interest on my 2018 tax return even I do not have T5 until 2019?
CRA is no help on their web site.
Deal Addict
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Dec 4, 2007
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Quebec
If ur gic is in cash, not in tfsa or rrsp, u will receive a t5 for all the interest u received in that year.

Some gic paid interest monthly, some yearly and other at the end of the term.
Deal Addict
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Dec 4, 2007
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cf7777 wrote: thx...
so I won't get T5 on 2018?
Do I still have post accrued interest on my 2018 tax return even I do not have T5 until 2019?
CRA is no help on their web site.
Is ur statement show interest paid? If no... Then no, because they will pay it in 2019 and u will have to report them all to cra at that time. If u report expected interest that have not been paid, u will pay taxes twice, cause u will have to report them in 2019.
Deal Addict
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Dec 24, 2007
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BC
cf7777 wrote: I like to find out how do you report interest earned on a term GIC.

Example

I started a GIC in Augest. So on Dec31st, it will have 4 month interest. It is more than 50$.
I know Bank will send me me a T5 for the 4 months.

Now my question
At the end of 2019, I will have 8 months of interest paid.

Will the T5 issue by the bank for the coming yr be the whole term or just the 8 months.?
What is the term of your GIC?

For Individuals, you only have to report any interest that was paid and any accrued interest on the anniversary date of the GIC - you do not accrue interest to December 31st.

Example,

If you bought a 2 year GIC on August 1, 2018 and there was no payment of interest in 2018, then for 2018 there is no inclusion of any interest as the anniversary date is not until August 1, 2019.

In 2019, at the 1st anniversary date of August 1, 2019, you will have 1 year of interest to report for 2019.

In 2020, at the 2nd anniversary date of August 1, 2020. you will have 1 year of interest to report in 2020.
Deal Addict
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Jul 25, 2008
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Ottawa
one year term.

Thank you to everyone
Deal Addict
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Jul 25, 2008
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What if, in this scenario, someone put cash money in GIC for one year on Jan 10..so it means 2018 you don,t have to pay interest in 2018?? until year 2019??

I am just trying to understand the Tax implications. Problem is CRA rules are not clear for General public.
Deal Fanatic
Apr 5, 2016
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Calgary/Vancouver
cf7777 wrote: What if, in this scenario, someone put cash money in GIC for one year on Jan 10..so it means 2018 you don,t have to pay interest in 2018?? until year 2019??

I am just trying to understand the Tax implications. Problem is CRA rules are not clear for General public.
Yep, if the payout is on Jan 10, 2019, you don't pay any taxes in 2018, but in 2019. If you want to spread out the income for taxes, there are GIC's that pay out monthly, but the interest is often lower.
Deal Fanatic
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May 11, 2014
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Rankin Inlet, NU
bomber17 wrote: Yep, if the payout is on Jan 10, 2019, you don't pay any taxes in 2018, but in 2019. If you want to spread out the income for taxes, there are GIC's that pay out monthly, but the interest is often lower.
+1 This. and just so it is clear for all, this includes whether the GIC is compounded or not.

Compounded, you have interest income each
interest pay date, even though you don't get the cash in hand.
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Deal Addict
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Jul 25, 2008
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Mine is calcilated daily pay monthly and compound.
Deal Fanatic
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Feb 19, 2010
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cf7777 wrote: Mine is calcilated daily pay monthly and compound.
CRA is quite clear. Cash basis meaning if you received cash, you pay tax on it in the year that you received it.

In your case, you are getting paid monthly so you will have income to declare and taxes to pay in both 2018 and 2019.
Deal Addict
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Jul 25, 2008
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Ottawa
thx for the clarification

My understanding recap
non registered GIC. CASH only

interest pay monthly bavk to your account.......You need to pay tax for the length of year. rest of the term on next year.

if interest only get pay lump sump at end of term. (1 year, 2 year..etc) you pay tax at the end of term.

thx everyone..again

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