15 Sources of Income That Canadians DON’T Typically Have to Pay Tax On

H&R Block Canada points to multiple income streams you don’t have to pay tax on, but cautions you still may need to declare it when filing your taxes - even if it’s tax-free

CALGARY, Alberta, Jan. 15, 2026 (GLOBE NEWSWIRE) -- With tax filing season quicky approaching, now is the time to dig out all those receipts and get your head around what’s new and different this tax season. But what many Canadians don’t know is that there are several income sources and money streams that you don’t pay tax on, or that don’t count as part of your taxable income. In fact, a 2025 study conducted by H&R Block Canada revealed that nearly two-thirds of Canadians (63%) don’t feel confident in navigating the constantly evolving tax credits and benefits to maximize their refund more generally and 50% had no clue whether to expect a tax return or not.   

“There’s a huge portion of Canadians we see each year that have no idea they don’t need to pay tax on certain income streams or credits and benefits they received. This can amount to a significant sum of money that stays in your pocket,” said Yannick Lemay, Tax Expert at H&R Block Canada. “These exemptions can add up to significant savings, from federal and provincial government benefits and credits, as well as medical, health and well-being, and work-related benefits. We advise all Canadians to act now to make sure they fully understand any tax exemptions they qualify for, and to navigate the hundreds of tax benefits and credits available to avoid leaving money on the table this tax season.”

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 or insurance claim or payout for personal injury, illness, or wrongful death are 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 need to report amounts above 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, aren’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.
    

“It’s important to note that even when income isn’t taxed, it doesn’t mean it’s invisible income,” said Lemay. “Some non-taxable amounts still need to be reported even if no tax is paid on it, as it can affect eligibility for certain credits and benefits. Ultimately, reporting non-taxable income helps ensure you get the right benefits, avoid any surprises, and helps you stay compliant with CRA requirements without increasing your tax bill.”

About the survey: These findings are from a survey conducted by H&R Block from February 12-13, 2025, among a representative sample of 1,790 Canadians. The survey was conducted in English and French. For comparison purposes only, a probability sample of this size would carry a margin of error of +/-2.53 percentage points, 19 times out of 20.

About H&R Block Canada: A trusted partner of Canadians for over 60 years, H&R Block Canada is Canada's tax leader. Serving almost 1,000 locations across Canada, H&R Block's team of Tax Experts use the latest in technological advances combined with real-world expertise to help people file taxes in office, file remotely, or use do-it-yourself Tax Software. H&R Block Canada can support in the preparation of personal, small business, corporate, U.S., rental, and estate taxes. H&R Block's comprehensive education program, Tax Academy, ensures our Tax Experts continually update their skills. Learn more at www.hrblock.ca or 1-800-HRBLOCK. 

For more information, contact: H&R Block c/o Ketchum: hrblockmediainquiries@ketchum.com 

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