Gift Tax in Canada
The Basics
| Fact |
Details |
| Gift tax? |
NO gift tax in Canada |
| No limit |
On cash gifts |
| But… |
Capital gains may apply |
| And… |
Attribution rules exist |
What This Means
| Gifting Cash |
No tax consequences |
| To anyone |
Children, family, friends |
| Any amount |
$100 or $1,000,000 |
| From giver |
No tax |
| To recipient |
No income |
Capital Gains on Gifts
When It Applies
| Scenario |
Tax Consequence |
| Gift cash |
None |
| Gift stocks (appreciated) |
Capital gain to giver |
| Gift property |
Capital gain to giver |
| Gift principal residence |
Usually exempt |
How It Works
| Example |
|
| Bought shares |
$10,000 |
| Current value |
$50,000 |
| Gift to child |
|
| You report |
$40,000 capital gain |
| Taxable amount |
$20,000 (50% inclusion) |
Deemed Disposition
| Rule |
|
| CRA treats gift |
As if sold at FMV |
| You pay tax |
On the gain |
| Child’s cost |
FMV at time of gift |
Attribution Rules
What They Are
| Purpose |
Prevent income splitting |
| Effect |
Income taxed to giver |
| Duration |
Varies by relationship |
Spouse/Common-Law Attribution
| Type |
Attribution |
| Interest/dividends |
Yes, attributed back |
| Capital gains |
No (generally) |
| Duration |
Until separation/death |
| Example |
|
| Gift $50,000 to spouse |
|
| Spouse invests, earns $2,000 |
|
| Giver reports |
The $2,000 income |
Minor Child Attribution
| Type |
Attribution |
| Interest/dividends |
Yes, attributed back |
| Capital gains |
No |
| Duration |
Until child turns 18 |
Adult Children
| Good News |
No attribution rules |
| Gift to adult child |
They report all income |
| No attribution |
On interest, dividends, or gains |
Strategies to Avoid Attribution
Lend at Prescribed Rate
| Steps |
|
| 1 |
Lend money at CRA prescribed rate |
| 2 |
Recipient invests |
| 3 |
Pays interest annually by Jan 30 |
| 4 |
Income taxed to recipient |
| Current Rate |
Check CRA quarterly |
| If investment returns > rate |
Tax savings achieved |
Gift for TFSA
| Strategy |
|
| Gift cash to adult child |
|
| They contribute to TFSA |
|
| No attribution |
TFSA income is tax-free anyway |
| Win-win |
|
Gift to RESP
| Strategy |
|
| Contribute to grandchild’s RESP |
|
| No attribution |
|
| RESP rules apply |
Grants, contribution limits |
Gift Inherited Money
| Unique Rule |
|
| Inheritance to spouse |
They invest it |
| Income is theirs |
No attribution on inherited funds |
Common Gifting Scenarios
Down Payment for Child’s Home
| Steps |
|
| 1 |
Transfer cash to child |
| 2 |
Provide gift letter for lender |
| 3 |
No tax consequences |
| Gift Letter Content |
|
| Amount |
How much |
| Relationship |
Who you are |
| Not a loan |
Must be a gift |
| Your signature |
Confirmation |
Helping with Education
| Options |
|
| Cash gift |
Tax-free, no attribution (adult) |
| RESP contribution |
Grants apply |
| Pay tuition directly |
Tax-free |
Wedding Gift
| Tax Treatment |
|
| Cash gift |
Tax-free |
| Any amount |
No limit |
| To couple |
Can gift to both |
Helping Elderly Parent
| Scenario |
Tax |
| Cash to parent |
Tax-free |
| Pay their bills |
No tax consequences |
| Buy them things |
No tax consequences |
Larger Gifts
Gifting Real Estate
| Scenario |
Tax Consequence |
| Gift cottage to child |
Capital gain on appreciation |
| Gift principal residence |
PRE may apply |
| Transfer investment property |
Capital gain + land transfer tax |
Gifting Business/Shares
| Scenario |
Considerations |
| Private company shares |
Complex valuation |
| Deemed disposition |
At FMV |
| Tax planning |
Essential—see advisor |
Gifting Registered Accounts
| You Cannot |
Directly gift RRSP/TFSA ownership |
| Instead |
Gift cash, they contribute |
| On death |
Can transfer to spouse/beneficiary |
Estate Planning Considerations
Lifetime vs Death
| Timing |
Consideration |
| Lifetime gift |
Remove from estate (probate) |
| At death |
Goes through estate |
| Appreciated assets |
May be better at death |
Probate Avoidance
| If |
Gift assets before death |
| Removes |
From probate calculation |
| But |
Can’t take it back |
| Consider |
Joint ownership instead |
Fair vs Equal
| Issue |
|
| Give more to one child? |
Your choice |
| May cause conflict |
Document reasoning |
| Consider |
Equalizing in will |
Documentation
Keep Records
| Document |
Purpose |
| Bank records |
Proof of transfer |
| Gift letter |
Confirms not a loan |
| FMV valuation |
For assets |
| ACB tracking |
Child needs for future sale |
Gift Letter Template
| Include |
|
| Date |
Of gift |
| Giver info |
Your name, address |
| Recipient info |
Their name, address |
| Amount/description |
What’s being gifted |
| Relationship |
How related |
| Statement |
“This is a gift with no expectation of repayment” |
| Signature |
Yours |
CRA Reporting
What to Report
| Scenario |
Reporting |
| Cash gift |
No T1 reporting required |
| Gifted assets |
Report capital gain/loss |
| Over $10,000 |
No special reporting |
No Gift Tax Return
| Unlike US |
Canada has no gift tax return |
| No Form |
To file |
| No limit |
On gift amounts |