If you have recently inherited a home from someone who has passed away, wondering what to do next might feel overwhelming. You may be trying to figure out what steps you should take, or if there are any specific taxes you’ll need to be aware of. Here’s some important information about inheriting a home in Canada.
Taxes on the property
There is no inheritance tax in Canada, so you most likely will not have to pay any tax on the property that you are inheriting. There are a number of different taxes and fees that the estate may have to pay but these are not personal to you. If the property was a primary residence of the person who passed away, it will be transferred to you with no fees. However, if the property was a secondary or vacation home, take note that capital gains taxes will need to be paid in the deceased’s final income tax payment as part of their estate.
You will only have to pay capital gains taxes going forward if you turn the home into an investment property, or you choose to sell it.
Deciding what to do with the home
Once the estate is settled and the home is yours, you have a few options. You could decide to move in, rent it out, or sell it — and you may not want to decide right away, especially while you’re grieving. It’s a good idea to consult a real estate lawyer so there are no surprises when you make a decision, but here’s what can happen in each situation:
- Move in. You’ll take over all payments, including the mortgage, insurance, maintenance, repairs, etc.
- Rent. An inherited home is considered to be a primary residence, so if you decide to rent it out for extra income, it will become an investment property — that means you’ll have to pay capital gains taxes.
- Sell. If you sell the home, you’ll be subject to paying capital gains taxes on the property’s increased value since the date of the person’s death, at a rate of 50%. So, if the home sells for $50,000 more than the fair market value at the time of the person’s passing, the capital gains taxes would be $25,000, which is 50% of the capital gain from the sale. Wondering how value is determined? When you receive property as an inheritance or gift, you are considered to have acquired it at fair market value according to the Government of Canada.
No matter what you decide to do with your inherited property, a knowledgeable agent can help you along the way.
Get To Know Wright Sisters Group
Discover the expertise behind the team with 100+ years of combined Toronto real estate experience.
