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Email this10:32 am
June 9, 2022
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When would I be taxed in this scenario?
On July 1 2023 I bought a 1 yr GIC. $10,000 at 5%.
As of Dec 31 2023 the vale is $10,225 but it's still locked in for another 6 months.
Will I be taxed $225 on my 2023 returns for the interest that has accrued as of Dec 31 2023 or will I be taxed $500 in 2024 for the total interest earned on this GIC once it matures on July 1 2024?
10:37 am
October 27, 2013
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The latter....
11:15 am
June 9, 2022
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Are you sure? Tangerine has taxed me for 2023.
11:32 am
October 27, 2013
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interest is calculated and accrued on each anniversary date of the GIC.
For a one year GIC, that would be on the date the GIC matures and taxed in the year received. In your case July 2024 and reported on your 2024 tax return. You would receive a T5 in 1Q2025 for that interest.
For a GIC with a term greater than 1 year in duration, the first accrual date for taxation purposes is the year of the first anniversary date and every anniversary thereafter regardless of whether you received interest (annual pay) or did not receive interest (compound GIC).
Tangerine is wrong if they have issued you a T5 for the accrual up to Dec 31, 2023.
11:32 am
June 9, 2022
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I double checked and I overlooked something. My bad.
Thanks.
1:29 pm
August 4, 2010
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Some FIs (including Oaken and EQ) will show a "fair market value" (or some similar name) for your GIC, which represents the prinicpal + notional interest to date. Think of it sort of like you would for an unrealized capital gain - it's the number you would get if you sold today, but it isn't actually reportable on a tax slip until you sell it, or in the case of the GIC they actually pay out (or compound) the interest.
And of course with a monthly pay GIC, they are paying out each month and would trigger a T5 for that first tax year, unlike the annual-pay case.
11:31 am
December 20, 2019
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If you have a Hubert Quarterly GIC the interest is paid quarterly.
So if one quarter falls into this year and 3 into next do you receive a T5 for the quarter in 2024 and then a T5 for the remainder quarters in 2025 or do you receive a T5 for all 4 quarters in 2025?
The reason I am asking is I expect less income from interest next year so I would love to defer my last quarter of this year until next year. I could do that by locking in a six month term but I'm hoping a quarterly term counts fully for the next taxation year and is not split up between the two.
11:48 am
January 25, 2024
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You will get T5 only for money received in current year.
If you have 1 quarter in 2024 and 3 in 2025 then you will get T5 for only THAT 1 quarter for 2024 and T5 for 3 quarters for 2025.
You DID earn interest in 2024 and it does not matter you did NOT withdraw it. Taxmen will consider that as earning...
12:23 pm
December 20, 2019
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Yes I figured that but technically it is a one year term unless it is withdrawn in a quarter and I was hoping that was an out for me.
6:00 pm
April 6, 2013
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The length of the term doesn't matter. One has received the interest for tax purposes each time the interest is paid out or compounded, if not paid out.
Should the paying or the compounding of interest occur less frequently than annually, then there is deemed to be an annual compounding. There is a prescribed formula for such deemed compounding.
Government changed the tax laws years ago to target taxpayers who were buying long term strip bonds and defering the taxes on the interest for years or even decades.
6:05 pm
December 20, 2019
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Norman1 said
The length of the term doesn't matter. One has received the interest for tax purposes each time the interest is paid out or compounded, if not paid out.Should the paying or the compounding of interest occur less frequently than annually, then there is deemed to be an annual compounding. There is a prescribed formula for such deemed compounding.
Government changed the tax laws years ago to target taxpayers who were buying long term strip bonds and defering the taxes on the interest for years or even decades.
Hmm, this forum really is missing a like button
Thank you
6:11 pm
December 20, 2019
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I made my decision and ended up not going to Hubert because I would have had to add the Oct-Dec quarter interest to this years taxes.
I went with the Saven 6 month GIC at 5% which means the entire 6 months interest will appear on my 2025 T5's.
Expected returns will be lower next year because I got 5.75% most of this year at Simplii so that tax bill will be proportionally high. Last thing I needed was adding a whole quarter from Hubert.
PS. I did all this because Simply went from 5.75% to 5.25% last month and then to 4.25% this month and I fully expect 3.5% next month.
I had a great run at 5.75% since October 2023 without locking the funds in.
9:05 pm
January 10, 2017
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Your 1st sentence is correct...but only if you withdraw the funds in December 2023. If you do not withdraw the funds in 2023, the T5 for the full 1 year term will be issued in 2025. This is as Norman1 stated.
11:56 pm
April 6, 2013
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The Hubert quarterly one-year term deposit pays and reinvests interest quarterly, even when one does not cash it early.
Those started this month (September) will have the first quarterly interest payment made in December. That first quarterly interest payment in December will be included in a 2024 T5 slip and reported on one's 2024 tax return.
4:08 am
December 20, 2019
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Lodown said
Your 1st sentence is correct...but only if you withdraw the funds in December 2023. If you do not withdraw the funds in 2023, the T5 for the full 1 year term will be issued in 2025. This is as Norman1 stated.
Norman1 said
The Hubert quarterly one-year term deposit pays and reinvests interest quarterly, even when one does not cash it early.Those started this month (September) will have the first quarterly interest payment made in December. That first quarterly interest payment in December will be included in a 2024 T5 slip and reported on one's 2024 tax return.
Yes, the opinions are varied on this one but like I said I went with a 6 month closed term so I can be sure all interest reports for 2025.
7:45 am
January 10, 2017
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Norman1 said
The Hubert quarterly one-year term deposit pays and reinvests interest quarterly, even when one does not cash it early.
If that is the case, they should stop referring to it as "1 year term"! In fact, I note Hubert refers to it as both "1 year term" and "1 year Quarterly term". The latter reference is the right one. They need better copywriters.
7:12 am
January 25, 2024
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Norman1 said
The Hubert quarterly one-year term deposit pays and reinvests interest quarterly, even when one does not cash it early.
If that is the case, they should stop referring to it as "1 year term"! In fact, I note Hubert refers to it as both "1 year term" and "1 year Quarterly term". The latter reference is the right one. They need better copywriters.
Well, it IS 1 year term as after one year GIC has matured and all funds go to your HISA.
Flexibility is you have an option to close GIC every 3 months without losing interest.
Please write your comments in the forum.