Most inheritances are not income to the person who receives them in Canada. The CRA lists most gifts and inheritances among amounts you don't report or pay tax on, so receiving one isn't income to you, but income earned on it afterwards, such as interest, is taxable. In short, most inheritances are not taxed when you receive them, and tax applies to what they earn and to gains on inherited property from then on.
The tax on the deceased person’s own gains and registered plans is paid on their final return before the estate is distributed; inheritance tax in Canada covers that side. This page is about what you, the beneficiary, report. Both pages are part of the investment tax hub.
What you receive and what you may owe
| What you inherit | Tax when you receive it | Tax afterwards |
|---|---|---|
| Cash | None | Interest or other income it earns, once it is yours |
| Shares, funds, crypto-assets | None | Capital gain or loss when you sell, measured from the value at death |
| A home, cottage or rental | None | Gain when you sell, measured from the value at death; rent if you rent it out |
| RRSP or RRIF as a named beneficiary | None on the value at death if you aren’t a qualifying survivor (it is taxed on the deceased’s return); a spouse or partner, or a financially dependent child or grandchild, reports a refund of premiums (from a RRIF, a designated benefit) as their own income and can defer the tax by transferring it to their own plan or an eligible annuity | Growth between the date of death and the payout is your income |
| TFSA | None on the value at death | Earnings after death, unless you are a successor holder |
| Life insurance death benefit | The CRA lists most life insurance amounts received after a death as not taxed | Income it earns, once it is yours |
Your cost for inherited shares and property
The CRA’s capital gains guide, T4037, says: “Generally, when you inherit property, the property’s cost to you is equal to the deemed proceeds of disposition for the deceased person.” Usually that is the fair market value right before the death, because of the deemed sale on the deceased’s final return: Capital property the person owned is considered sold at fair market value immediately before death, and the gain or loss is reported on Schedule 3 of the final return. The gain up to the date of death has already been taxed to the deceased, so when you sell, you report only the change in value since.
The guide names exceptions, such as property inherited from a spouse or common-law partner, which can roll over at the deceased’s own cost, and farm property or a woodlot transferred on death to a child. If you inherited from your spouse, the cost may be treated differently, depending on an election made in the deceased’s final return.
You inherit shares worth $150,000 at the date of death and sell them two years later for $170,000.
| Item | Amount |
|---|---|
| Sale price | $170,000 |
| Your cost (value at death) | $150,000 |
| Capital gain you report | $20,000 |
| Taxable capital gain at the 50% inclusion rate | $10,000 |
Keeping the value at death on record is what makes this figure provable; adjusted cost base explains how later purchases change it.
An inherited home. Your cost is its value at the date of death. If you move in and it becomes your home, the principal residence exemption can cover the gain for the years you designate it. If you keep it as a cottage or rental, the gain after the date of death is taxable when you sell, and rent is income.
Income before the estate is settled
The executor may have to file more than the final return. The CRA’s list of returns to file includes a T3 trust return “for income earned after the date of death that hasn’t been paid to beneficiaries”. If the estate pays income out to you and issues a T3 slip, that income goes on your own return.
Tax the deceased still owed can follow the assets. The inheritance tax page explains what a clearance certificate does and who is liable for unpaid tax; asking the executor whether one was obtained is a reasonable check before spending a large inheritance.
Inherited RRSPs and RRIFs
When an RRSP or RRIF goes to someone other than a qualifying survivor, its value at death is income on the deceased’s final return, not yours. A qualifying survivor who receives it as a refund of premiums (from a RRIF, a designated benefit) reports it as their own income instead, and can claim a deduction for the amount moved into their own plan: At death, an RRSP is taxed on the final return unless it goes to a qualifying survivor: a spouse or common-law partner (who can roll it into their own RRIF or an annuity at any age, or into their own RRSP if 71 or younger at the end of that year), a financially dependent child or grandchild with an impairment (RRSP, RRIF or RDSP), or another financially dependent child or grandchild (an annuity to age 18).
Growth after death is yours. The CRA’s RRSP page for someone who died says that an increase in value “between the date of death and the date of final distribution to the beneficiary or estate” has to be included in the income of the beneficiary or the estate for the year it is received, on a T4RSP slip. What happens to an RRSP when you die and RRIF successor and beneficiary rules cover the forms.
Inherited TFSAs
How a TFSA is taxed depends on how you were named:
- As successor holder. Only a spouse or common-law partner can be named successor holder (Quebec doesn't recognize the designation, except for TFSA annuity contracts); they become the new holder of the same TFSA, which stays tax-free, without using their own contribution room.
- As a designated beneficiary. A designated beneficiary (anyone you name; Quebec doesn't recognize the designation on deposit or trust TFSAs) receives the TFSA's value at death tax-free; earnings after the date of death are taxable to them. A surviving spouse or partner named as beneficiary may be able to contribute the payment to their own TFSA as an exempt contribution. What happens to a TFSA when you die lists the conditions.
A beneficiary who isn’t eligible for the exempt contribution and wants the money in their own TFSA contributes it from their own room. What happens to a TFSA when you die has the steps.
Foreign inheritances
An inheritance from outside Canada is not income either. Two things can still apply:
- Form T1135. If the specified foreign property you hold, such as a foreign bank account or shares of a foreign company, has a total cost of more than $100,000 at any time in the year, you file Form T1135 with your return. The CRA’s T1135 questions and answers say the cost amount of foreign property acquired by inheritance is its fair market value at the time the gift, bequest, or inheritance was received, and that personal-use property, such as a vacation property used primarily as a personal residence, does not have to be reported.
- Income from the property. Interest, dividends or rent from inherited foreign assets goes on your Canadian return once the property is yours, under the same rules as other investment income.
The country where the deceased lived may tax the estate under its own law; that is settled by the foreign estate, not on your Canadian return.
Probate comes out of the estate
Provincial probate fees are paid from the estate before distribution, so they reduce what beneficiaries receive rather than being a tax on the beneficiary. Taxes at death shows the fee on sample estates, and probate fees by province covers every province.
A checklist for beneficiaries
- Record the value at death of every non-cash asset you receive, from the executor or the estate’s valuations. It is your cost when you sell.
- Keep the slips the estate or plan issuer sends you, such as a T3 for estate income paid to you or a T4RSP for RRSP growth after death, and report them on your return.
- For a TFSA, check whether you were named successor holder or beneficiary; if you are a surviving spouse named as beneficiary, ask the issuer for the TFSA’s value at death. A spouse or common-law partner named as beneficiary, or a surviving spouse or common-law partner in Quebec, can contribute all or part of the payment to their own TFSA as an exempt contribution, which doesn't use their own contribution room, if they contribute it by the end of the calendar year that follows the year of death and send Form RC240 to the CRA within 30 days of contributing; the contribution can't be exempt if the deceased's TFSA held an excess amount or payments went to more than one survivor. What happens to a TFSA when you die lists the conditions.
- For foreign assets, add up the cost of your specified foreign property to see whether Form T1135 applies.
- Before spending a large inheritance, ask the executor whether the final return has been assessed and a clearance certificate obtained.
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them between September 23, 2026 and October 1, 2026. How we check facts.
- Canada Revenue Agency: Capital Gains – 2025
- Canada Revenue Agency: Questions and answers about Form T1135
- Canada Revenue Agency: Amounts that are not reported or taxed
- Canada Revenue Agency: Taxable capital gains on property, investments, and belongings
- Canada Revenue Agency: Farming and fishing income and property - Prepare tax returns for someone who died
- Canada Revenue Agency: Death of an RRSP Annuitant
- Canada Revenue Agency: If you are a successor holder of a TFSA
- Canada Revenue Agency: What happens when a TFSA holder dies
- Canada Revenue Agency: If you are a designated beneficiary of a TFSA
- Canada Revenue Agency: Tax-free Savings Account (TFSA)
- Justice Laws (Canada): Income Tax Act
- Justice Laws (Canada): Income Tax Act