How to read your T3 and T5 slips

Every year around late February or March, my brokerage sends me a stack of tax slips. T3s and T5s, each one a grid of numbered boxes with dollar amounts that don’t obviously connect to anything I did during the year. The first time I tried to make sense of them, I spent way too long staring at “Box 26” wondering if it was the number I was supposed to report or the one I wasn’t. I genuinely considered just handing the whole pile to an accountant and walking away.

If you’ve ever felt that way, this is for you. Tax slips look intimidating, but once you understand what each one is and which boxes matter, they’re actually pretty manageable.

None of this is financial or tax advice. If your tax situation is complex, talk to an accountant. Tax rules change, and the specifics here are current as of when this was last updated.

The difference between T3 and T5

The short version: a T5 reports investment income paid to you directly. A T3 reports investment income that flowed through a trust.

T5 (Statement of Investment Income) is what you get from banks and brokerages for things like interest on a savings account, GIC interest, or dividends from individual Canadian stocks you own directly. If you hold shares of Royal Bank and they pay you a dividend, that shows up on a T5.

T3 (Statement of Trust Income Allocations and Designations) is what you get from trusts, and in Canada, most ETFs and mutual funds are structured as trusts. When an ETF like XEQT or VGRO earns income and distributes it to you, it flows through the trust structure and gets reported on a T3.

The key distinction is not really about the type of income. It’s about how it reaches you. Interest is interest whether it’s on a T3 or a T5. Dividends are dividends. The slip just tells you the path the money took.

You can absolutely get both T3 and T5 slips in the same year. If you own individual stocks and ETFs in a non-registered account, you probably will. They report different income from different sources, and you need to enter both on your tax return.

The important boxes on a T5

The T5 is the simpler of the two. Here are the boxes you’ll see most often.

Box 13: Interest from Canadian sources. This is straightforward. If your bank paid you interest on a savings account, a GIC, or a bond, the total shows up here. Interest is taxed as regular income, which means it’s added to your salary and other income and taxed at your marginal rate. No special treatment.

Box 24: Actual amount of eligible dividends. This is the dollar amount you actually received in eligible dividends from large Canadian public companies. This is your real money, the cash that landed in your account.

Box 25: Actual amount of other than eligible dividends. Same idea, but for non-eligible dividends (sometimes called ordinary dividends), typically from smaller Canadian private corporations.

Box 26: Taxable amount of eligible dividends. This is where people get confused. This number is higher than Box 24. It’s the “grossed-up” amount, which is what you actually report on your tax return.

Why is it higher than what you received? Because of the dividend gross-up and tax credit system. The CRA grosses up the dividend amount (currently by 38% for eligible dividends), and then gives you a dividend tax credit to offset part of the tax. The gross-up is designed to account for the corporate tax the company already paid before distributing the dividend. You report the larger amount, but the tax credit brings your actual tax bill back down. It’s not double taxation. It just looks alarming on paper.

The important boxes on a T3

The T3 has a lot more boxes than the T5, because trust distributions can include many types of income all bundled together. Here are the ones that matter most for the average ETF or mutual fund investor.

Box 21: Capital gains. If the fund sold holdings at a profit during the year, your share of those capital gains shows up here. This is the full capital gain amount. Only 50% of it (the taxable portion, under the current inclusion rate) gets added to your income. This is separate from any capital gains you personally trigger by selling your units of the fund.

Box 49: Actual amount of eligible dividends. Similar to Box 24 on the T5. This is the real dollar amount of eligible Canadian dividends that the fund received and passed through to you.

Box 26: Taxable amount of eligible dividends. Same concept as Box 26 on the T5. This is the grossed-up amount you report on your return, not the actual cash you received. The dividend tax credit offsets the gross-up.

Box 23: Actual amount of eligible dividends. On some T3 slips, you may also see this box for eligible dividends. The key numbers to focus on are the “actual amount” (what you received) and the “taxable amount” (what you report).

Box 32: Other income. This is a catch-all for income that doesn’t fit neatly into the other categories. Foreign income that’s been converted to Canadian dollars sometimes ends up here. It’s taxed as regular income.

Box 42: Amount resulting in cost base adjustment. This is return of capital. It deserves its own explanation because it’s the box people most often overlook, and getting it wrong can cost you.

Return of capital: the box that catches people

Return of capital (Box 42 on the T3) is not taxable income. You don’t report it as income on your tax return. Sounds great, right?

The catch is that it reduces your adjusted cost base (ACB). Your ACB is what the CRA considers you to have paid for your investment. When you eventually sell, your capital gain is the sale price minus your ACB. If your ACB has been quietly shrinking because of return of capital distributions you ignored, your capital gain will be larger than you expected, and so will your tax bill.

If you hold ETFs in a non-registered account and they distribute return of capital, you need to track it. Every year, subtract the Box 42 amount from your ACB. It’s tedious, but it’s the only way to get the right number when you sell.

Putting it all together

When you sit down to do your taxes, here’s the basic process.

Check CRA My Account first. Most tax slips are filed electronically with the CRA. If you use tax software like Wealthsimple Tax, TurboTax, or StudioTax, many of them can pull your slips directly from CRA using the Auto-fill feature. This saves time and reduces errors from manual entry.

Cross-reference with your brokerage. Your brokerage should also make your tax slips available online. If the numbers don’t match what CRA has, or if a slip is missing, contact your brokerage. T3 slips in particular sometimes arrive late (the deadline for issuers is the end of March), so you may need to wait or file an adjustment later.

Enter each slip separately. If you have three T3 slips and two T5 slips, enter all five. Each slip reports income from a different source, and they don’t overlap. Your tax software will have a section for T3 slips and a section for T5 slips. Just fill in the box numbers as they appear.

Don’t panic about the grossed-up dividend amount. When you see a “taxable amount” that’s higher than what you actually received, that’s normal. The dividend tax credit will appear further along in your return and offset the gross-up. The system is designed so that eligible Canadian dividends are taxed at a lower effective rate than regular income.

Common questions

What if I hold everything in a TFSA or RRSP? You won’t get T3 or T5 slips for investments held in registered accounts. The income and gains inside those accounts aren’t reported on your tax return. You only get these slips for non-registered (taxable) accounts.

What if I get a corrected slip? It happens. Sometimes brokerages issue amended T3 or T5 slips after the original. If you’ve already filed your return, you may need to file an adjustment. Your tax software usually makes this straightforward.

What about foreign income? Foreign dividends and interest earned in a non-registered account are reported on your tax slips too, though they may appear in different boxes or on a separate T5 or T3. Foreign income is generally taxed as regular income. If foreign tax was withheld at the source, you may be able to claim a foreign tax credit. The relevant box numbers vary, so check the CRA’s guide for your specific situation.

The short version

T5 slips report income from direct holdings: bank interest, dividends from individual stocks. T3 slips report income from funds structured as trusts: most ETFs and mutual funds. You may get both. Enter all of them. Pay attention to the difference between “actual amount” and “taxable amount” for dividends. And if you see return of capital on a T3, track it so your ACB stays accurate.