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Thursday, November 25, 2010

Am I taxed when I inherit my Dad's house?

This is a question I'm asked often, and was asked again today, so I thought I'd take a few minutes to share some information about this.

It isn't possible to give a "yes" or "no" answer to this question because a lot depends on the specific facts. But usually the situation giving rise to the question involves a parent dying and leaving his or her only house to a child. In other words, there is only one parent's name on the title to the house (as opposed to a title with joint names on it). And note that a child must be of the age of majority in that province to inherit the house.

Because the house is real estate, there will have to be a Grant of Probate or a Grant of Administration issued by the court before the house can be transferred to the child. There is a probate fee involved, and a fee to the Land Titles Office for their services. These fees are always paid by the estate, even if it means that the house has to be sold to pay them.

Assuming the Grant is issued and all fees are paid, title to the house will pass to the child. There is no capital gain assessed on the transfer of the house from the parent to the child because it was the parent's principal residence. If the Will instructed that the house be sold and the money given to the child, there is still no capital gains tax on the transaction.

If the child inherits the parent's house and later decides to sell it, the tax implications depend on several factors, including whether the house is the child's principal residence or not. So even though the child may receive the home without paying tax, he or she might have to pay tax when the house is sold or transferred.

As a general rule, beneficiaries in Canada don't pay tax on inheritances from Canadian estates.


  1. Thanks.Invaluable clarification. How about
    1. If the Principle house has been registered three ways:- Father, mother and only child? & if one parent dies?
    2. Secondly if the investment properties are registered in the names of Father, Mother and a daughter and unfortunately both the parents pass away in a common disaster?
    3. In Canada, would the nett rental income
    has to be declared by mother, father and a child if they have equal equities in the investment properties?

  2. I was advised that I could be taxed if I inherited my parents home in the case of a 2nd death. For example, my father passes away and my mother inherits the home. Subsequently, my mother passes away later on and then I, her son, inherit the home. I was explained that in this case, taxes would have to be paid by the estate for the home.

    Is this true?

    1. You're actually talking about two different things here. You being taxed and the estate being taxed are two totally different things.

      In Canada, beneficiaries don't pay tax on what they receive from a Canadian estate. So you, personally, won't pay any taxes associated with the estate.

      The advice you received about tax on the house was crap. I sure hope it wasn't told to you by an accountant or lawyer.

      If the house you're talking about was your parents' principal residence (and from the sound of the question, it is) then there is no tax on the house when it passes to the estate. Everyone in Canada is allowed to sell or will their principal residence without being taxed on it. Makes no difference which parent passes away first.

      Note that if your parents own another peice of real estate, like a cabin or rental property etc, there WILL be tax when they pass away and that other property goes into the estate.

      Any taxes that are owed by the estate - capital gains tax, income tax on RRIFs, etc - all has to be paid out of the estate before you inherit anything.


    2. Hello. Just sending a reply to ask a question. My father recently passed and before he did he signed the title to his over to his sister and himself still. He was not able to return home due to his stroke, and now that he recently passed, his sister wants to sign the title of his house over to me to sell and I'm living in Canada. She is in the states. Are there any problems I should or shouldn't worry about? I'M a little unclear of what exactly I need to do and doing some research before consulting my lawyer again

  3. Hello Lynne, I have a question regarding this. My mother recently passed away and my father still lives in their home. At the time of settling mom's estate, my brother and I were added to the deed (along with my father), at the time that we removed mom's name at land titles. Both my brother and I are grown and own our own homes (so not living with dad). Dad wishes for us to inherit his house, as indicated in his will. We thought we could avoid probate fees if we added ourselves to the title now, but in hindsight I'm now concerned that we may have created a tax liability for my brother and I if we sell the house following dad's passing. The concern is that my brother and I may each have to pay capital gains tax on a third of the house's appreciation from the date that we registered on the title. How will CRA view this? Thanks.

  4. I am a us citizen my parents own a cottage in Canada. When they pass what do i have to do to keep the cottage.

  5. HermioneLosAngelesJune 5, 2013 at 10:38 AM

    I am a California resident with a disabled child (under 18) who has SSI (disability benefits). My aunt wants to bequeath her condo in Toronto to me, or me and my brother. If she doesthat, will I be 1.) taxed 2) will this affect my son's benefits since it is income? 3. )If it is split between my brother and me, who do not own our homes currently and are California residents, will we be taxed or made to pay any fees?

  6. Hello Lynne,

    I live in BC and my husband passed away a few months ago. We owned half a duplex which is paid for, and I plan to continue living in the duplex.
    We have a son who is not married. I have the intention to buy an apartment with him, joint tenancy, 50 /50 as a way of helping him now and diminish the taxes when I will pass away. He is our only son and the only relative I have.
    When I die the apartment will become his property fully. In my will I will live him my PR (the duplex). The duplex will go into the estate, the probate fees will be paid and then the duplex becomes his property. The question is: Would he have to pay taxes on the duplex since he has already another property which it happens to have been owned jointly with me?
    Is this a good strategy to minimize taxes? I know that if I buy the apartment as tenants in common my share of the apartment will be part of the estate and he will have to pay taxes for it.
    I really appreciate your opinion. Thank you.

  7. Dear Lynne,
    My US citizen mother owns a cabin on the lake in Canada and is wondering the best way to pass that property down through our US citizen family for the coming years. What is the best cost saving way to make that happen?
    Thank you for your reply.


  8. Hi Lyn, I have a particular situation they could use some clarification. I live with my mum to take care of her for health reasons. When I get married my spouse and myself will liver with her. This is also her principal residence. My dad passed away and the mortgage and title still has both my parents names on it. My mum wanted to add my name to save on taxes upon her death.
    Would this have any impact on capital gains or taxes to the estate or to myself if we choose to go either way. Keep in mind this is my primary residence and I personally own no other properties. My wife will retsin ownerhsp of her own condo

  9. I've recently inherited a house from an uncle of mine, along with 4 other people. He purchased the home for 140k about 25 years ago. He passed in 2010 and wrote in his will that the house could not be sold until his brother passed away (because he was living there with him). His brother recently passed and the house has now sold. We've been told that the sale of the house will be taxed according to the difference between original sale price (140k) and the recent sale price (850k). I thought if it was a primary residence being inherited that it would only be taxed on the difference between the day he died and the day it sells. Am I miss something? Thanks!!

  10. Hi Lynne

    A question on inheritance tax.

    My mother-in-law recently passed and now my father-in-law is in a home. My brother-in-law is the power of attorney and the executor of finance. My father-in-law signed over the power of att to him. We recently sold the parents house and now my brother-in-law wants to divide the proceeds of the sale to the 4 children.

    My question is do the children have to pay tax on the funds they receive or could it be a gift since my father-in-law is still alive?

    1. Distributing the proceeds of the sale would be theft. Your brother-in-law does NOT have the legal authority to give that money to anyone or to take any of it for himself. As a POA, he MUST invest it for your father-in-law and doing anything else is considered theft by power of attorney. It's an offence under our Criminal Code.


  11. Does inheriting a home that has been your principal residence trigger any unusual fees or taxes? This involves a home, owned by a single parent and has been rented to a child for their principal residence.

    1. First of all, we need to clarify what "principal residence" means. It does not mean "where you live". If it was rented to you by an owner, it is NOT your principal residence. You have to own a property for it to be your principal residence.

      When you inherit in Canada from a Canadian estate, you do not pay taxes on what you inherit. This is the same whether it's a house or money. The tax is not based on who gets the property; it's based on who owned it before you inherited it. If it was the principal residence of the deceased, then there is no capital gains tax on it. If it was not the principal residence of the deceased, then there will be tax on the transaction.

      Despite the fact that the owner of the residence did not live there, it may still qualify as his or her principal residence because it was occupied by an immediate family member. I suggest that you check out Canada Revenue Agencies webpage about principal residency to see whether the parent can call the home his/her principal residence. If it's not clear, the best idea is to ask an accountant. Be sure to present the whole picture including any other properties owned by the parent when you ask the question.


    2. Thank you Lynne. I did misunderstand the term principal residence. My wife and I have rented from her mother for 40 years and had been hoping this might trigger some tax relief. When you say there would be tax on the transaction, are you meaning capital gains if we decided to sell, or actually on the inheritance? I will be looking at the CR webpage for some clarification.


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