A T3, officially the Statement of Trust Income Allocations and Designations, reports income that a trust allocated to you as a beneficiary or unitholder. The trust flows the income out instead of paying tax on it, and the character of that income - interest, dividends, capital gains, foreign income - is preserved so you pay tax on each type at the correct rate.

Who gets a T3 slip in Canada?

Anyone who held units of a mutual fund or ETF structured as a trust, a REIT, or another income trust in a non-registered account. You will also get one as the beneficiary of an estate or a family trust. Most Canadian-listed ETFs are trusts, so a plain index ETF in a taxable account is enough to generate one.

Do I get a T3 for investments in my TFSA or RRSP?

No. Income earned inside an RRSP, RRIF, TFSA, FHSA, or RESP is sheltered, and sheltered accounts do not generate tax slips. If every unit you own sits in a registered account, you will never see a T3 for it.

Why do T3 slips arrive so late?

A trust has 90 days after its tax year end to file its return and issue slips. Most trusts have a December 31 year end, which pushes the deadline to March 31 - a month after T4s and T5s are due. The trust also has to wait on its own slips before it can calculate what it allocated to you, which is why the deadline is longer in the first place.

Can I file my return before my T3 arrives?

You can, but you probably should not. Filing before all your slips are in is the most common T3 mistake, and it usually ends in an adjustment. Check CRA My Account before you submit. If a slip genuinely never shows up, estimate the amounts from your December statement, file on time, and amend afterward - late-filing penalties cost more than an adjustment does.

What is box 42 on a T3 slip?

Box 42 is return of capital. It is not taxable in the year you receive it, and it does not go on a line of your return. Instead it reduces the adjusted cost base of your units, which increases your capital gain when you eventually sell. It is a deferral, not a tax break, and it only works in your favour if you actually track it.

What is the difference between a T3 and a T5?

The difference is the legal structure of what you own, not whether it is a fund or a stock. Trusts issue T3s. Corporations issue T5s. So a mutual fund structured as a trust sends a T3 while the same company's corporate-class fund sends a T5, and individual shares in a Canadian company send a T5. The box numbers are not interchangeable between the two slips.

Why does my T3 show income I never received in cash?

That is a reinvested, or phantom, distribution. Late in the year a fund realizes capital gains on its internal trading, declares a distribution, immediately reinvests it, and consolidates units so your unit count does not change. No cash arrives, but the gain is still allocated to you and still taxable. Because you paid tax on it, that amount increases your adjusted cost base.

01 Sep 2026 9 min read Investing

What Is a T3 Slip and How Do You Read It?

Has this happened to you - you filed your taxes early in the season, gotten an early tax return and then a wild T3 shows up in your brokerage account in late March because of your non-registered? A T3 with not a huge amount. But now you realize you filed return that was wrong, and you already reinvested your tax return. Well, time to fill out a T1-ADJ.

That is the T3 in one story. It reports real, taxable income, it arrives later than everything else, and most people who get one for the first time did not know they were going to. And this is why you want assets that can issue a T3 in your TFSA. More on this in my dividend post and below.

Here is what it is and how to read it.

What a T3 Actually Is

The full name is the Statement of Trust Income Allocations and Designations.

A trust generally does not pay tax on income it pays out to its beneficiaries. It flows that income through, keeps its character intact, and you pay tax on it at your own rates. Interest stays interest. Capital gains stay capital gains. Dividends stay dividends. The T3 is the paperwork that records what got flowed through to you.

Two words in that title matter more than they look. Allocations, not payments. And designations, meaning the trust is telling the CRA what type of income each dollar was. That distinction is why a T3 can show income you never actually received in cash, which we will get to.

Who Gets One (and Who Does Not)

You will get a T3 if, in a non-registered account, you held:

Mutual funds or ETFs structured as trusts. Most Canadian-listed ETFs are. XGRO, XBAL, XEI, CASH.TO - all trusts.
REITs. SmartCentres, Dream Industrial, RioCan, and every other .UN ticker.
Any income trust or unit trust.

You will also get one if you are the beneficiary of an estate or a family trust, which is how a lot of people meet their first T3 - a parent dies, the estate earns income before it is wound up, and a slip arrives with your name on it.

You will not get a T3 for:

Anything inside an RRSP, RRIF, TFSA, FHSA, or RESP. Sheltered accounts do not generate slips.
Individual stocks. Bank shares, Enbridge, Fortis - those are corporations, so you get a T5.
Mutual funds structured as corporations rather than trusts. Same fund company, different legal wrapper, T5 instead.
Limited partnerships. Those issue a T5013.
Most US-listed ETFs held in a non-registered account. Your broker reports that foreign income on a T5.

The dividing line is not "fund versus stock." It is trust versus corporation. That is the whole test.

Why It Shows Up So Late

T4s and T5s are due by the last day of February. T3s are not.

A trust has to file its return, and issue slips, within 90 days of its tax year end. Most trusts have a December 31 year end, so the deadline lands on March 31 - two months after everything else, and one month before your own April 30 filing deadline.

There is a real reason for it, not just bureaucracy. Before a trust can tell you what it allocated to you, it has to figure out its own income - and the trust is often waiting on T5s from the companies it holds, which arrive at the end of February. That leaves the trustee roughly a month to calculate everything and get slips out. So they use the month.

The practical rule - if you hold anything in a non-registered account, do not file before mid-April. Check CRA My Account first. Filing in early March to feel productive is how you end up amending in May.

The Boxes That Matter

Most T3s use a handful of boxes. Here are the ones you will actually see:

Box	What it is	Where it goes
21	Capital gains	Subtract box 30, put the difference on line 17600 of Schedule 3
23	Actual amount of non-eligible dividends	Nowhere directly - it feeds box 32
32	Taxable amount of non-eligible dividends (box 23 x 1.15)	Line 12000, and also line 12010
39	Dividend tax credit, non-eligible	Combined with box 51 on line 40425
49	Actual amount of eligible dividends	Nowhere directly - it feeds box 50
50	Taxable amount of eligible dividends (box 49 x 1.38)	Line 12000
51	Dividend tax credit, eligible	Combined with box 39 on line 40425
25	Foreign non-business income	Line 12100, plus Form T2209
34	Foreign non-business income tax paid	Form T2209 for the foreign tax credit
26	Other income - interest, rental, business income flowed through	Subtract box 31, put the difference on line 13000
42	Amount resulting in cost base adjustment	Nowhere on your return. Read the next section.

Watch the box numbers. T3 numbering does not match T5 numbering, and this catches people who assume it does. On a T5, boxes 24/25/26 are the eligible dividend trio. On a T3, box 26 is "other income" and eligible dividends live in 49/50/51. If you are entering slips by hand rather than importing them, that is an easy and expensive mistake.

Also note there is no dedicated interest box on a T3. Interest gets folded into box 26 with everything else miscellaneous.

Your software handles all of this if you use CRA Auto-fill. The reason to know the boxes is so you can tell when something looks wrong.

Box 42 Is the One That Bites You Later

Box 42 is return of capital. It is not taxable this year. Instead, it reduces your adjusted cost base (ACB).

REITs generate a lot of it. So do some covered call and monthly income funds. And because it shows up as cash in your account with no tax attached, people quietly assume it is free money. It is not. It is a deferral, and the deferral eventually lands.

Say you buy 500 units of a REIT at $20:

ACB: $10,000
Year 1 T3: box 26 of $210, box 21 of $45, box 42 of $320
You pay tax on the $210 and on half the $45. Nothing on the $320.
New ACB: $9,680, or $19.36 per unit
Year 2, same $320 of ROC. ACB: $9,360
You sell at $22. Proceeds $11,000.
Capital gain: $1,640, not the $1,000 you were expecting.

The extra $640 is the two years of return of capital catching up with you, taxed at capital gains rates instead of income rates. That is genuinely a good outcome - deferred and converted to a lower-taxed form. But only if you tracked it. If you did not, you just told the CRA your gain was $1,000 when it was $1,640, and the T5008 your broker filed says otherwise.

One more thing - if enough ROC drives your ACB below zero, the negative amount becomes an immediate capital gain that year and your ACB resets to zero. Rare unless you have held a heavy-ROC fund for a very long time, but it happens.

Phantom Distributions - Income You Never Received

The other T3 surprise is the reverse problem.

In December, many ETFs declare a reinvested capital gains distribution. The fund realized gains on its internal trading during the year and has to flow them out. So it declares a distribution, immediately reinvests it, then consolidates units so your unit count does not change. No cash hits your account. Nothing appears on your statement.

You still get a T3 with the capital gain on it.

Example - your fund declares $0.62 per unit in reinvested capital gains. You hold 500 units. Box 21 shows $310 and you never saw a dollar of it.

Here is the part people miss - because you were taxed on it, that $310 increases your ACB. Same math as box 42, opposite direction. Ignore it and you pay tax on the $310 this year, then pay tax on it again as a larger capital gain when you sell.

Do not rely on your broker's "book value" column for any of this. It is a convenience number. It is frequently wrong after account transfers, and it does not always reflect ROC or reinvested distributions. Track ACB yourself in a spreadsheet.

A Few Other Things Worth Knowing

Amended slips are common. Trusts revise T3s more than any other slip. Another reason not to file the day your last slip arrives.
There is no minimum threshold. T5s have a $50 floor. T3 income has to be reported regardless of amount.
Quebec residents get an RL-16 too. Same income, provincial slip.
If a slip never arrives, file anyway. Use your December statement to estimate, file on time, and amend later. Late-filing penalties are worse than an adjustment.
You may get several T3s for one holding, especially if you switched brokers mid-year.
Some slips split capital gains into "periods." That is leftover plumbing from the 2024 proposal to raise the inclusion rate to two-thirds. That proposal was cancelled in March 2025 and never became law. The inclusion rate is one-half. The CRA kept the period boxes for consistency with slips already printed.

Short Version

A T3 reports income allocated to you by a trust - ETFs and mutual funds structured as trusts, REITs, estates, family trusts.
Non-registered accounts only. Registered accounts generate nothing.
Due 90 days after the trust's year end, so usually March 31. Do not file early.
Boxes 32 and 50 are the taxable dividend amounts. Box 21 is capital gains. Box 26 catches interest and everything else.
T3 box numbers are not T5 box numbers. Do not assume.
Box 42 is return of capital. Not taxed now, reduces your ACB, taxed as a bigger gain later.
Reinvested distributions are taxable with no cash attached, and they increase your ACB.
Track your ACB yourself. Your broker's book value is not authoritative.

Please check CRA My Account before you hit submit.

The ACB tracking is the part that actually takes work. But it is the part that costs you real money if you skip it, and the cost shows up years later when you have forgotten why.