Inheriting a House in Canada
No inheritance tax, but a deemed sale at death: what the estate pays, your cost as heir, and what to do next.
The short version
- Canada has no inheritance tax. You don't pay income tax on receiving a house from an estate.
- Instead, the person who died is treated as selling everything at fair market value just before death. Any taxable gain is reported on their final return, and the estate pays the tax before the heirs get the property.
- A home that was the deceased's principal residence is usually tax-free. A cottage or rental usually isn't, and a rental can also bring back depreciation (recapture).
- Property left to a surviving spouse or common-law partner rolls over at the deceased's cost, with no tax until the spouse sells or dies.
- Your cost as the heir is the market value at the date of death. If you later sell for more, you pay tax on that increase, unless it became your own principal residence.
Inheriting a House in Canada
When someone leaves you a house, the tax question is usually the last thing on your mind, and that's fine: in Canada, it's mostly the estate's problem, not yours. But "mostly" is doing some work there. What the estate owes can decide whether you get the house at all, and what you do with it afterwards decides whether you'll owe tax later. Here's how it works from both sides.
What Happens at Death
| Property | On the deceased's final return |
|---|---|
| Their principal residence | Deemed sold at market value; gain usually fully exempt (still reported, on form T1255) |
| A cottage or second home | Deemed sold at market value; capital gain, half taxable, unless designated for some years |
| A rental property | Deemed sold at market value; capital gain plus recapture of depreciation claimed |
| Anything left to a spouse or common-law partner (or a qualifying spousal trust) | Rolls over at cost; no tax until the spouse sells or dies (the executor can elect out) |
The final return is due by April 30 of the following year, or six months after the death if that's later. More on the cottage side is on cottage capital gains.
Settling an estate with a home or cottage?
Enter the property, the deceased's cost and the value at death. The SmartFile works out the tax on the final return, applies the principal residence designation, and prepares form T1255 or T2091(IND).
What the Estate Has to Do Before You Get the Keys
- Value the property at the date of death, ideally with a written appraisal. That value is the deceased's proceeds and your future cost.
- File the final return and pay any tax on it.
- Pay probate fees where the will is probated. In Ontario, the estate administration tax is $15 per $1,000 of estate value above $50,000 (nothing on estates of $50,000 or less).
- Ask CRA for a clearance certificate (form TX19) before distributing everything. Without it, the executor can be personally liable for unpaid tax.
- Transfer the property to the heirs, or sell it and distribute the cash.
If the estate has a large tax bill and not much cash, the house may have to be sold to pay it, even if the will leaves it to you.
After You Inherit
| What you do with it | Tax for you |
|---|---|
| Sell it soon | Gain or loss measured from the date-of-death value; usually small. Selling costs can create a capital loss |
| Move in and make it your home | Can be your principal residence from then on, if your family doesn't designate another property for those years |
| Rent it out | Rental income on form T776; your cost for CCA is the date-of-death value (building share) |
| Keep it as a cottage | Capital gain from the date-of-death value when you eventually sell or die |
What about the 365-day flipping rule? A sale because of the death of a related person is one of its listed exceptions, so selling a parent's home soon after you inherit it is normally fine. If you inherited from someone who wasn't related to you and plan to sell within a year, we're not sure how CRA would apply the rule; get advice first. See house flipping tax for the rule.
A Sale by the Estate
If the executor sells the house before distributing it, any change in value between death and sale belongs to the estate's own T3 return; the executor's step-by-step is on selling a house from an estate. A loss on a sale within the estate's first year can, with an election, be carried back to the deceased's final return to reduce the gain there. That's a technical step; ask the estate's accountant.
Inheriting From Outside Canada, or as a Non-Resident
- Property abroad left to a Canadian resident: no Canadian inheritance tax, but foreign estate or inheritance taxes may apply, and foreign property over $100,000 must be reported on form T1135 each year.
- Canadian property inherited by a non-resident: selling it later requires a clearance certificate.
Records to Keep
Keep the appraisal at the date of death, the estate's final return, the probate certificate and the transfer documents. Your cost depends on them, possibly decades from now. See how long to keep tax records. More on how property sales are taxed is on capital gains tax in Canada, and on reporting a home sale on principal residence reporting.
The executor's full job is on death and the final tax return, and the beneficiary's side on inheritance tax in Canada.
Inherited House Questions
Do I pay tax when I inherit a house in Canada?
No. Canada has no inheritance tax. Any tax is paid by the estate on the deceased person’s final return, based on a deemed sale at fair market value just before death.
What is my cost if I inherit a house?
Generally the fair market value at the date of death. That becomes your adjusted cost base for calculating any gain when you sell.
Is the deceased’s home taxable on their final return?
Usually not, if it was their principal residence for all the years they owned it. It must still be reported and designated on form T1255.
What happens if a house is left to a surviving spouse?
It rolls over to the spouse at the deceased’s cost, so no tax is payable until the spouse sells it or dies.
What is the Ontario probate fee?
Ontario’s estate administration tax is $15 per $1,000 of estate value above $50,000. Estates of $50,000 or less pay none.
Sources: CRA, Capital gains on a deceased person's return; Reporting the sale of your principal residence (form T1255); Ontario, Estate Administration Tax. Checked October 2026. Estate loss carryback and foreign inheritance rules are summarized; other provinces' probate fees differ.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.