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In Canada When Are Gifts or Inheritances Taxable?


In Canada, gifts and inheritances are generally not taxable to the recipient. However, there are some important nuances and exceptions to consider:

  1. Gifts: Gifts given to individuals are not considered taxable income for the recipient in Canada. This means that if someone gives you a gift of money or property, you typically don't have to report it as income on your tax return, and you don't owe income tax on the value of the gift. The giver of the gift may be subject to gift tax or other taxes, but this is rare in Canada.
  2. Inheritances: Inheritances are also generally not taxable to the beneficiary in Canada. When you inherit money or property from a deceased person's estate, you do not have to pay income tax on the value of the inheritance. However, if the estate earns income after the individual's death (e.g., from investments), that income may be subject to taxation.

While gifts and inheritances are typically not taxable, there are some exceptions and special cases to be aware of:

    • If you receive a gift or inheritance from your employer or as part of your employment compensation, it may be considered taxable employment income.
    • If you receive a gift from a business associate or client, it might be considered a taxable benefit if it is related to your business activities.
    • If you receive a gift or inheritance from a foreign source, there may be different tax rules and reporting requirements.
    • If you inherit a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP), there can be tax implications, and it's advisable to consult with a tax professional to understand the specific rules.
    • Capital Gains: While the gift or inheritance itself is not taxable, if you later sell an inherited asset (e.g., property or stocks), you may be subject to capital gains tax on any increase in value from the time you inherited it. The capital gains tax would be calculated based on the fair market value at the time of the inheritance and the selling price at the time of the sale.

Additionally, provincial, or territorial tax rules may also apply, so it's essential to consider both federal and provincial/territorial tax implications.

It would be prudent to consult with our office for specific guidance on your individual circumstances, as tax laws can be complex and subject to change. 

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Thursday, 30 May 2024

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