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Email this4:52 pm
April 9, 2019
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Is interest on ISA’s and money market ETF’s taxed differently than GIC’s?
If so how much is the difference?
Specifically interested in TD TDB8150 ISA and TDB2913 Money Market Fund.
Thank you!
5:02 pm
August 4, 2010
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The TDB8150 (and all similar ISAs) are just CDIC-insured bank accounts at heart, and would report out simple interest (although on a T3 form instead of a T5, I believe). TDB2913 should be almost all interest income, but since they are holding very short-term government and corporate notes, I suppose there's a possibility for a tiny amount of capital gains if they are doing any selling, although I suspect for a short term money market fund this would be negligible if it exists at all.
I don't seem to have any recent T5s from my TDDI brokerage accounts for these - I don't think I've had large enough amounts in any one of these for long enough to generate the $50 minimum reporting amount to generate a slip, although that might change this year.
So it will be taxed the same as if you got GIC interest, or from a savings account, and your regular tax rate.
5:08 pm
August 4, 2010
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Just checked historical distributions for that TDB2913 money market fund, and it is indeed all regular investment income, not a penny of capital gains or dividends.
5:31 pm
April 9, 2019
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Thank you kindly for your detailed reply NorthernRaven.
I forgot to mention one detail: i do not take cash distribution, instead i choose 'reinvest' option and it gives me more units. Does it make any difference?
And I have yet another question: when I receive my work payments, which happens irregularly; I move all funds indo DirectInvest buy TDB8150/2913. then sell/withdraw smaller amounts as required for day-to-day living. DirectInvest account drains until i get paid another chunk of money.
I earn useable amount of interest this way. The question is: is it tax efficient strategy or I will be taxed excessively by doing this?
5:45 pm
October 27, 2013
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You only earn taxable interest on the units of a ISA or MMF that you own at the time. It matters not how often you buy or sell units, no different than money you would move into, or out of, a HISA.
5:51 pm
August 4, 2010
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And even with reinvestment, you will get a tax slip each year for the deemed/accrued interest or reinvested distribution, just like with a longterm GIC. Can't hide from the taxman... 🙂
6:00 pm
April 9, 2019
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Thank you for your replies gentlemen,
I can live like that.
9:24 pm
April 6, 2013
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TDB8150 ISA are deposits with The Toronto-Dominion Bank and not units of a mutual fund. Distributions would be interest reported on a T5 slip just as if one had a GIC or savings account at a TD Canada Trust branch issued by TD Bank.
TDB2913 are series D units of the TD Canadian Money Market Fund, a mutual fund trust. Distributions would be reported on a T3 slip. Interest distributed by the mutual trust would be on the slip as "Other income" (Box 26) from a trust. That other income from a trust is reported differently than deposit interest. But, taxed at the same rate as interest. Any capital gains distributed would be on the slip as "Capital gains" (Box 21).
10:05 pm
August 4, 2010
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Ah, so the ISA (TDB2913) generates an actual T5. Makes sense, it is only a FundServ MF for ease of sale to brokerages, but at the bank it is a just another deposit on the books.
I found a T5 issued to me by a TD $USD money market fund. It shows 3 cents interest in box 21, but no other income (box 26). I'm guessing I held some for a short time stashing dividends until the next purchase, and the fund must have ha some trivial event that triggered a nominal capital gain. CRA doesn't require interest reporting until $50 I think, but that 3 cents of cap gains had to cry out!
10:12 pm
August 5, 2022
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Just to be clear, do you report the transactions for the TDB8150 on schedule 3. Say one bought 10,000 units at $10 for $100,000 then a few months later sold them for $100,000.
$100,000 proceeds minus $100,000 ACB= 0 capital gain?
Reading post 5 it appears transactions are not reported.
4:34 am
March 30, 2017
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The only 2 that are taxed as capital gain are HSAV and HSUV.
They reinvest the interest and you get it when you sell, triggering a capital gain and tax as such.
So if u need monthly income from it, it’s not for you.
7:28 am
October 27, 2013
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Jimmy said
Just to be clear, do you report the transactions for the TDB8150 on schedule 3. Say one bought 10,000 units at $10 for $100,000 then a few months later sold them for $100,000.$100,000 proceeds minus $100,000 ACB= 0 capital gain?
Reading post 5 it appears transactions are not reported.
ISAs like TDB8150 are CDIC insured deposit accounts, like bank accounts, so transactions do not go on Schedule 3. It can be confusing because they use the mutual fund FundServ system for transactions.
Generally speaking, CAD based money market mutual fund transactions also do not need to go on Schedule 3 if unit prices do not deviate from $10. I have not bothered to report them on Schedule 3 because the net gain/loss is zero and CRA knows that.
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