Personal Finance » Tax

A list of things not taxed in Canada

A list of things not taxed in Canada

In Canada, we pay a lot of tax. In fact, it’s been said there are two certainties in life – death and taxes.

Most income is taxed at your personal marginal tax rate. Although we do pay a lot of tax, one of the biggest misconceptions about tax is that half our income goes to taxes.

We hear lots about how much tax we pay especially this time of year but I ran across this list of things from Canada Revenue Agency (CRA) that are not taxed. It’s not a big list but still a good list to know. When you are doing your tax planning for the future, it’s important to recognize things that are not taxed just as much as it’s important to know what is taxed and how its taxed.

According to CRA, you do not have to include certain amounts in your income, including the following:

  • any GST/HST credit or Canada Child Tax Benefit payments, as well as those from related provincial and territorial programs;
  • child assistance payments and the supplement for handicapped children paid by the province of Quebec;
  • most amounts received from a Tax Free Savings Account (TFSA)
  • compensation received from a province or territory if you were a victim of a criminal act or a motor vehicle accident;
  • lottery winnings;
  • most gifts and inheritances;
  • amounts paid by Canada or an ally (if the amount is not taxable in that country) for disability or death due to war service;
  • most amounts received from a life insurance policy following someone’s death;
  • most payments of the type commonly referred to as “strike pay” you received from your union, even if you perform picketing duties as a requirement of membership;

As I mentioned, this list was taken right from the CRA website. I have one more to add to the list and that is proceeds from the sale of your principal residence. When you sell property that is not your principal residence, you have to pay capital gains taxes if you sell the property for more than you originally paid for it. This would include rental property, investment property, and recreational property. Your principal residence qualifies for a principal residence exemption. Can you think of other income that is not taxed?

It is important to note that if you invest income sources from any of the above amounts, you will be taxed on earnings. For example, if you won $1 million dollars in a lottery and you invested all or part of the winnings, the investment earnings are taxable.

Not all income is taxed the same

The best income to have is income that is not taxed. The next best income to have is income that is taxed at a lower rate. I call this tax efficiency. Most income (like salary, bonus, rental, and interest as examples) is taxed at your marginal tax rate. Some investment income is tax preferred like dividends and capital gains because they are taxed at lower rates which creates greater tax efficiency.

To see the tax benefits of dividend and capital gains income, download the Marginal Tax Rate Card – Marginal Tax Rate Card


  1. Mike Holman

    If you want to get into things that are “sometimes” tax-free, I’d say

    1) Personal exemption amount – you can earn a certain amount (min $10k) of income and not pay any taxes.

    2) Capital gains are tax-free, when offset with a capital loss.

    • Jim Yih

      Thanks Mike.
      On that line of thinking, you might also include the first $2000 of pension income because of the pension income tax credit.

  2. eileen alie

    our primary residence is in Windsor Ont and we have a country cottage in Quebec appraised by the city of Lantier quebec at
    $ 125,000.( land and building ) If we sell at that price, what are the capital gains penalty/ impliacations .

    Thank You

    • Jim Yih

      Generally speaking the capital gains is based on your market value or sales price less your adjusted cost base (ACB). Although this is overly simplistic, the ACB is what you paid for the property.

      If you are unsure, it is always good to seek some professional advice from an accountant.

      Thanks for the question

    • Jim Yih

      I should also mention that the taxable gains is half of the total gains. If you owned the property with a spouse, you can split the taxable capital gains between you and your spouse.

  3. rick macneill

    My sister wants to know what would she have to pay in tax’s for renting her trailor. Shes 65 and moving into an apt. in town. She thought she would try renting instead of selling to help with her old age pension. She also gets some can. pension. She would rent for about $400/mo. She was afraid the tax would be to high for her to bother. Thanks for your time..

    • Marcus

      First off I don’t know how old this comment is but.

      If she decides to rent out her trailer at $400/mo. Then that would be an extra $4800/yr earnings. Assuming she would just be on OAS which is approximately $570/mo. as of may 2016 is $6840/ yr for a total income of $11640

      That is what she would be taxed on (-cpp because she’s retired and under 75)

      So with a federal basic personal exemption in 2016 of $11474 she would pay federal tax on $166 @ 15% ~ $25, and because it’s non employment income I think she wouldn’t have to pay ei on it (not 100% sure but confident enough). So that would only leave provincial taxes which athe worst is the province of Quebec at 16% but they have a slightly higher deduction the the Feds so it would be at most about $50~60 in taxes per year, assuming no other income. And That’s only assuming she forgets the age amount.

  4. Mick

    Am I liable for tax on the sale of my UK property to both the UK and Canadian tax offices? The house in the UK was occupied by me since Jan 2005, emigrated to Canada in 2012, sold the property in 2014.

  5. Justin W


    you mentioned “most gifts and inheritances” are not taxed.
    Can I gift to cash to my parents and open a TFSA in their name?
    Most resources out there are about gifting to your adult children rather than the reverse.

    Is there an annual limit to this gift? Is it as easy as writing a check to their name and not reporting it come tax time?


    • Marcus

      Well that depends, where the TSFA is tax deductible, it is only tax deductible to the person(s) who’s name is on the agreement for a TSFA (if you want to sign on their behalf and make it a surprise you’ll want PoA, otherwise at least one of them will have to be present with you). As for a limit that would be the annual contribution limit yah that’s the maximum allowed contribution to the TSFA.

      Just give them the cash and call it a gift, tax free for everyone.

      • Dave


        TFSA contributions are NOT tax deductable.


        You can give money to your parents but it will be after tax money and it is you that will have paid the tax. If your parents put the gifted money into their own TFSA, 1 it is then their money and you have no claim on it and 2 if it earns money in the TFSA account no tax is payable on it and, again, it will be your parent(s) money.

  6. Cosmo

    Hi, Do I have to file an income tax return if I earn no taxable income then? For example, if I solely live on my lottery winnings and don’t have a job, do I have to file a return at all? I don’t make any investments with any of my lottery winnings. My lottery winnings is from betting on sports games through the Ontario government and playing poker at casinos run by the government.

  7. debi atkinson

    Will i be taxed on my CPP ? I have been receiving it for almost a year and when I got my child rearing check they said I would be taxed so make sure to put money aside?

    • Doug Runchey

      Hi Debi – Yes, CPP benefits are taxable income.

  8. Merve

    Hi Doug – My wife and I are in the age group of 80 and 75 with partial disability and in receipt of a joint income of approximately $33,000 based on OAS/GIS/CPP only. We don’t own any properties etc. and our current rental is in the region of $15,000. We have been on the waiting list on Housing Connections for approximately 10 years for a geared to income rental unit. The government is considering approval of a monthly payment of $200 to top up the current rent of $1275 as a temporary measure for qualified applicants on the wait list. Is this payment taxable and will this affect our OTB? Maybe you or your colleagues could help me with an answer.

    • Doug Runchey

      Hi Merve – I’m sorry, but I don’t know the answers to your questions but hopefully somebody else might know and reply.

      • Merve

        Can somebody else respond, please? Thank you

  9. Susan Smith

    Hi,I am being taxed on 39,000 a year.I am told that a small pention of 10,000. is not taxed at all and is a personal exemption What is your thought?.

    Susan Smith

  10. Joseph Vella

    Hi All! I live in Europe. Is there a limit to how much money I can wire, one time only, not regularly, to a brother living in Victoria B.C. and will he have to pay tax on that sum?

  11. William Melater

    I have a government certified Service Dog – and pay monthly premiums for ‘pet insurance’. Can I deduct those premiums as a health expense and do I have to include payouts from the insurer when the service animal is treated and I receive insurance benefits?

  12. John Sanderson

    I am about to retire in Canada and have a couple of small private pensions from the UK. IF I was in the UK I would have the opportunity to take up to 25% of the pensions as a tax free lump sum and then a reduced monthly pension amount. If I do this would the lump sum be classed as income and liable to Canadian taxes?

  13. Emily H

    Hi, I live in Hong Kong and will retire in Canada next year. May I know whether my pension fund that I earn while working in Hong Kong needs to be taxed in Canada? I think I will receive my pension monies in 2021 (i.e. one year after I move in Canada)

  14. Scott

    I am a non-resident living abroad in a country that has an agreement with Canada and I receive an annual income of $11,500 through CPP & OAS. Do I need to pay tax on this at 75+?

  15. Jon

    Did you ever get an answer? I’m in the same boat..

  16. Andrew H

    Hi there, is it the case that if my wife and I have an investment property, we would no longer be eligible to receive GIS (guaranteed income supplement) payments?

    Thank you for your advice in advance,

    Thank you

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