Tax considerations for your Margin account

Each year in February or March we make tax slips available to you in your Questrade account. What tax slips you receive depends on the following:

  • Your account type
  • The activity that took place in your account during the year
  • Your residency (i.e., the province, country you live in)

For other tax-related information, see Getting ready to file your tax return and Important dates for tax slips

See also our complete list of tax resources.

At a high level, for Margin accounts:

  • If you deposited money into your account or purchased securities, you do not receive a tax slip. The securities you've purchased will appear on a Trading Summary
  • If securities you purchased paid income, like a dividend, we provide you with an Income Summary and tax slip based on your residency
  • If you sold securities you previously purchased (including transferring them to a registered plan), we provide you with a Trading Summary and a T5008 tax slip

This table shows what tax slips you receive for the above situations:

KB-article-tax-considerations-for-your-margin-account (1) (2) (1)

We describe this in more detail below.

  • SwitchArrow Your actions - selling securities

    During the tax year, you may sell securities you previously purchased or, in the case of short selling, you may close your position. The sale of securities in these situations may be taxable as a capital gain or loss.

    Capital gains/losses and adjusted cost base (ACB)

    A capital gain or loss is the difference between the money you initially invested and the amount you received from the sale. This is calculated based on the adjusted cost base (ACB) for the security, and the final sale price. The ACB is the cost of purchasing a security, adjusted for expenses and other activity in your account related to that security. 

    If the money you receive from the sale of the security is greater than the ACB, then you have made a capital gain, and 50% of that amount is taxable. 

    If the money you receive from the sale of the security is less than the ACB, then you have a capital loss. A capital loss can be used to offset capital gains you have in the same year, any of the preceding three years, or in future years.

    Tax documents reporting sale of securities

    At tax time, you will receive the following related to the sale of securities:

    • Trading Summary, which reports all security trading (buys and sells) in your account during the year
    • Statement of Securities Transactions (T5008) which reports the amount paid or credited to you for securities you sold during the tax year. On this tax slip: 
      • The amount in Box 21 is the money you received for selling a security
      • The amount in Box 20 is the cost or book value (cost base) of the security that was sold. The cost base is the original value of an asset.

    These documents do not state your capital gains or losses. You use these documents, along with your own records you keep to track your buys and sells, to help you determine the capital gains or losses for securities you have sold during the year.

    Important note: The amount in Box 20 may or may not represent the actual ACB. In some cases the amount may appear as "0", either because the cost base is actually zero or we do not have an accurate cost base. To make sure you are accurately reporting your capital gains and losses in your tax return, it is your responsibility to keep track of the ACB for each of your securities and consult with a tax or accounting advisor as needed.

    For an example of how the ACB is calculated, see What you need to know about next year's taxes right now.

    Tax considerations for active traders

    If you trade actively, you need to be aware that you may be considered as a day trader by the CRA, which can have tax consequences—meaning that when you sell securities they could be considered as business income rather than capital gains, and as such would be fully taxed.

    Whether you are considered a day trader by the CRA can depend on a number of factors such as frequency of trades (especially intraday trades), whether this trading activity is a core part of your normal business activity, and other factors.

    If you are concerned about whether your trading income may be taxed as business income because of your frequent trading activity, please contact your tax or accounting advisor for guidance.

  • SwitchArrow Your actions - transfer to a registered account

    If you transfer securities from your Margin account to a registered account (TFSA, RRSP, etc,), you will be considered to have sold the security at fair market value in your Margin account and re-purchased it in your registered plan, which means it is taxable income. In this situation, taxation is the same as for an actual sale and would be reported on the Trading Summary and T5008.

  • SwitchArrow Activity in your account - income paid to you

    Income paid to you is typically what is paid from a security you previously purchased; for example, a dividend. 

    For Canadian securities, the structure of the organization where the income originates from determines the tax slip, as follows:

    • T5 (Statement of Investment Income) reports income from an organization structured as a corporation
    • T3 (Statement of Trust Income) reports income from an organization structured as a trust
    • T5013 (Statement of Partnership Income) reports income from an organization structured as a partnership

    Income from foreign securities that is deemed taxable by the CRA is reported on a T5 as foreign income, regardless of its structure.

    Here is more information about each of these tax slips.

    T5 / RL-3

    • Reports dividend income, interest income, and foreign Income paid on your investments
    • The amounts in the boxes of the T5 represent the total of the amounts shown on your Income Summary
    • A T5 is issued for the currency of the holding; so if you have both U.S. and Canadian securities that paid income, you will receive two T5s
    • A T5 is not issued if your total investment income is less than US$50 or CDN$50; however, you must still include this income on your tax return
    • If you own shares of a split share corporation, you will receive a separate T5 for expenses and income related to investments in this stock class
    • You may also receive a T5 if you hold shares in a real estate investment trust (REIT) or regulated investment company (RIC)
    • If you are a Quebec resident, you also receive an RL-3 tax slip

    T3 / RL-16

    • Reports investments held in Canadian income trusts, royalty trusts, or real estate investment trusts (REITs), typically paid from Canadian ETFs (exchange-traded funds)
    • You will receive a T3 tax slip and Summary of Trust Income which specifies the amount and nature of these distributions in your account
    • Mutual fund companies generally issue their own tax slip
    • If you are a Quebec resident, you will also receive an RL-16 tax slip

    T5013 / RL-15

    • Reports units held in a Canadian limited partnership (or units of a partnership)
    • If you are a Quebec resident, you will also receive an RL-15 tax slip

    Below is a list of typical income from Canadian securities which is reported individually in separate boxes on the appropriate tax slip (this is not an exhaustive list):

    • Dividend - for dividends from Canadian companies, a dividend tax credit amount will appear on your tax slip
    • Interest on bonds and Guaranteed Investment Certificates (GICs)
    • Return of capital - this is a non-taxable return of some of your investment in a security; however, it does reduce your adjusted cost base (ACB)
    • Capital gains from a flow-through entity such as  a formal trust, partnership, or registered investment club

  • SwitchArrow Activity in your account - income paid by you

    Examples of activity in your account where income paid by you is taxable are:

    • Interest paid by you on margin. This amount is reported on your Income Summary under "Paid by you." To determine whether a tax deduction applies in your situation, please consult with your tax or accounting advisor
    • Trading commissions. Trading commissions you may pay to purchase securities are used to increase the adjusted cost base (ACB) for that security. Trading commissions you pay to sell securities are deducted from the money you receive for those sales. Both purchase and sale trading commissions are reflected in the amount shown in Box 20 of the T5008 tax slip. The money you received from the sale of a security is shown in Box 21 of the T5008

  • SwitchArrow Activity in your account - mergers and acquisitions

    When two organizations decide to merge, or one acquires the other, this merger may be taxable and may also result in some income being payable: in cash, in kind, or as deemed (non-cash) income. If the merger is taxable, we will report the deemed sale and adjusted cost base at the time of the merger on the T5008 tax slip.

  • SwitchArrow Activity in your account - dividend reinvestment plans (DRIP)

    If you have set up a dividend reinvestment plan (DRIP) with Questrade to reinvest any income your securities pay you and to buy additional units of the security, this income is taxable and increases the total adjusted cost base (ACB) of your investment.

  • SwitchArrow FAQ: My T3 slip (Statement of Trust Income) refers to a capital gain, but I’ve received nothing in my account. Do I have to report this amount?

    Yes, this amount must be reported. For a T3 that reports income from ETFs (exchange-traded funds) or mutual funds, this represents a non-cash distribution (or phantom payment) which has been reinvested in the ETF. In this situation, no actual payment has been made to the account.

  • SwitchArrow FAQ: Why is my T3 slip (Statement of Trust Income) issued so late?

    Trust companies must also file tax returns, and may wait until the prescribed time frame (i.e., 90 days after year-end) before they send the issuer the required information to produce the T3 slips.

    Delays in T3 slips could also be due to late disclosures and amendments by some income trusts and limited partnership units.

    The regulatory deadline to provide T3 slips to customers and to file with the CRA is March 31.

  • SwitchArrow FAQ: Does the amount in Box 20 of my T5008 slip represent the adjusted cost base (ACB) for calculating gains or losses from the sale of a security?

    This amount represents the cost or book value (cost base) of a security that was sold during 2020. Cost base is the original value of an asset.

    In some cases, this amount may or may not represent the adjusted cost base (ACB), which is required to calculate the gain or loss for tax purposes. To make sure you are accurately reporting your capital gains and losses in your tax return, it is your responsibility to keep track of your ACB for each of your securities and, if necessary, consult with your tax or accounting advisor.

  • SwitchArrow FAQ: Why is there a zero in Box 20 of my T5008?

    Box 20 on the T5008 reports the cost or book value (cost base) of a security that's been sold during 2020. While the cost base may actually be zero, there are a number of other reasons why this amount may show as zero:

    • The security was transferred from another institution and the cost base was never passed to us. In this case, to obtain the true amount, you will need to check your account statement with your previous broker.
    • You did not actually pay for the security; for example, a company for which you hold securities has issued rights to its shareholders
    • You did a short-sell transaction, where we are unable to determine an accurate cost base

  • SwitchArrow FAQ: Do we provide a T1135 Foreign Income Verification Statement?

    The T1135 statement is an individual income tax format that is submitted with an individual's T1 general. As this is not a regulatory requirement, we do not provide this statement at this time. However, we are looking at providing this for customers in the future.

  • SwitchArrow Disclaimer

    Questrade does not provide tax or accounting advice. These materials have been prepared for your information only and are not intended to provide, and should not be relied on for, tax or accounting advice. You should consult your own tax and accounting advisors for these matters. 

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