15 Sources of Income That Canadians Typically Don’t Need to Pay Tax On

H&R Block highlights 15 sources of income that Canadians typically don’t need to pay tax on:

1. Gifted money: No matter how big or small the amount is, money received as a gift isn’t considered taxable regardless of whether it comes from a family member, friend or another individual. While the gifted money itself is tax free, any income generated from the gifted money after you receive it is taxable. The person gifting the money also doesn’t receive a tax deduction for the gifted money. The Canada Revenue Agency (CRA) may request documentation to confirm the source of funds, so it’s important to keep any record of transfer for the gifted amount.

2. Inheritance: Cash or property that’s inherited isn’t considered taxable income. However, any income earned after you receive it (like interest or rental income) is taxable.

3. Life insurance payouts: Most life insurance death benefits paid to beneficiaries are tax-free. This includes lump-sum payments received after the insured person passes away.

4. Lottery and prize winnings: Money won from lotteries, game shows, radio contests, bingo, casinos, or most other prize winnings aren’t taxable in Canada. However, if they were earned as a business activity, they would be.

5. Casino winnings from abroad: Canada doesn’t tax winnings regardless of where they’re won. However, many countries do tax gambling winnings for non-residents, and the casino or government can withhold taxes at source or require you to file a local tax return. Don’t forget, if you’re bringing more than CA$10,000 back into Canada, it must be declared. This isn’t for tax purposes; it’s due to Canada’s anti-money laundering reporting requirements.

6. Child support payments: If you receive child support under an agreement or court order, payments aren’t taxable to the recipient nor tax-deductible for the payer.

7. Personal injury or wrongful death compensation: Money received through a court settlement, insurance claim, or payout for personal injury, illness, or wrongful death is typically non-taxable.

8. Workers’ compensation benefits: If you receive payments due to a workplace injury or illness, these benefits are generally not taxable, though they may affect certain tax credits.

9. Certain scholarships, fellowships, and bursaries: If you’re a full-time student, most scholarships and bursaries are tax-free. Part-time students may be required to report amounts exceeding certain thresholds.

10. Capital gains on the sale of your principal residence: If you sell your primary home, any profit is usually completely tax-free if it qualifies as your principal residence for the years owned.

11. GST/HST credits: This quarterly benefit, designed to help low- and modest-income Canadians offset sales taxes, isn’t considered part of your taxable income.

12. Canada child benefit (CCB): The CCB is a tax-free monthly payment to eligible families with children under 18, which doesn’t increase your taxable income.

13. Union strike pay: If you receive strike pay from a union, it’s generally not taxable, provided it’s meant to help cover living expenses and not tied to services rendered.

14. Disaster relief and emergency assistance: Financial assistance received due to natural disasters or emergencies (such as floods or wildfires) from governments or registered charities is usually tax-free.

15. Income Earned Inside a TFSA: Interest, dividends, and capital gains earned within a Tax-Free Savings Account (TFSA) are completely tax-free, even when withdrawn.

H&R Block | 613-938-6239 | andrea.fitzgerald@hrblock.ca