Inheritance Tax in Canada
What a beneficiary pays tax on and what they don't, the value-at-death cost rule, inherited homes and foreign inheritances.
The short version
- Canada has no inheritance tax. Money or property you inherit isn't income, and you don't report it on your return.
- The tax was dealt with before you got it: the deceased's final return taxed the gains and the RRSP, and the estate paid it.
- Your cost for inherited property is its fair market value at the date of death. Sell later for more and you pay tax only on the increase after death.
- Income the inheritance earns after you receive it (interest, dividends, rent) is taxable to you, and a TFSA or RRSP you inherit has its own rules.
- Inheritances from outside Canada aren't taxed by Canada either, but you may need to report foreign property over $100,000 on form T1135, and the other country may have its own tax.
Inheritance Tax in Canada
People inheriting money in Canada often set aside a third of it "for the tax", which is prudent, and also unnecessary. Canada doesn't tax beneficiaries on what they receive. The tax happens one step earlier, on the deceased person's final return, and the executor pays it before handing anything out. What you do with the money afterwards is your tax business again. Here's exactly what is and isn't taxed.
What You Pay Tax On, and What You Don't
| You inherit | Tax when you receive it | Tax later |
|---|---|---|
| Cash | None | Interest it earns |
| A house or cottage | None (the estate dealt with the gain) | Gain above the value at death when you sell, unless it becomes your principal residence; see inherited property |
| Stocks or funds | None | Dividends and gains above the value at death; see capital gains tax |
| RRSP or RRIF as a named beneficiary | None to you in most cases (the deceased's final return pays); a spouse or dependent child can instead roll it into their own plan | Growth after death, if paid out later |
| TFSA as beneficiary | None on the value at death | Growth after death is taxable; a spouse as successor holder can keep the TFSA going |
| Life insurance payout | None | Income it earns |
| Income paid out by the estate | Taxable, reported on a T3 slip | – |
Inheriting property or investments?
Tell the assistant what you're inheriting, its value at the date of death and what you plan to do with it. It explains what you'll owe now and later, and how to keep the records you'll need.
Your Cost Is the Value at Death
Inherited property comes with a new tax cost: its fair market value when the person died. Example: your mother bought shares for $20,000 and they were worth $100,000 at her death. Her final return taxed the $80,000 gain. You inherit them with a $100,000 cost. Sell for $110,000 and your gain is $10,000, half of it taxable. Keep the estate's valuation or statements from the date of death; without them you'll have trouble proving your cost.
Inheriting a House or Cottage
- Keep it as a rental or second property: gains after death are taxed when you sell, and rent is income; see rental property tax.
- Move in: it can become your principal residence from then on, but you have one exemption per family per year; see principal residence exemption.
- Sell soon: usually little or no gain beyond the date-of-death value; selling costs can even create a small loss for the estate.
- Inherited with siblings: each of you owns a share with its own cost; see buying property with family.
Inheritances From Abroad
- No Canadian tax on receiving an inheritance from a foreign estate.
- Other countries may tax the estate or the heir; that tax is generally the estate's or the foreign heir's concern, not CRA's.
- Form T1135: if you then hold foreign property costing more than $100,000 in total, report it each year. The penalty for late filing is $25 a day, up to $2,500.
- Bringing money into Canada isn't taxable; keep the estate documents in case your bank or CRA asks where it came from.
Rules of Thumb
- Don't report the inheritance itself as income.
- Do keep the date-of-death values for everything you receive.
- Ask the executor for T3 slips if the estate earned income before paying you.
- Use your TFSA and RRSP room before investing the rest in a taxable account; see TFSA.
- Be patient with the executor. The clearance certificate can take months, and it protects everyone.
The estate's side is on estate taxes in Canada and death and the final tax return.
Inheritance Tax Questions
Is there an inheritance tax in Canada?
No. Beneficiaries do not pay tax on money or property they inherit. Taxes are paid by the estate, mainly on the deceased’s final return.
Do I have to report an inheritance on my tax return?
No. The inheritance itself is not income. Income it earns afterwards, such as interest, dividends or rent, is reported as usual.
What is the cost of inherited property for tax purposes?
Generally its fair market value at the date of death. When you sell, you pay tax only on the gain above that value.
Is an inherited RRSP taxable to the beneficiary?
Usually not. The value is included in the deceased’s final return, and the estate pays the tax. A spouse, or a financially dependent child or grandchild, can instead transfer it to their own plan and defer the tax.
Do I pay tax on an inheritance from another country?
Canada does not tax the inheritance. You may need to file form T1135 if your foreign property costs more than $100,000, and the other country may have its own tax.
Sources: CRA, Capital gains on a deceased person's return; Filing and payment due dates. Checked October 2026. Rules for inherited RRSPs, TFSAs and T1135 are summarized as we understand them. Foreign estate and inheritance taxes are not covered.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.