10 Potential Tax Consequences of Helping Your Child Buy a Home in Canada
What parents need to know before stepping in—and why the smartest support comes with structure.
The Modern Canadian Reality: When Parents Step In
With real estate prices across Canada continuing to rise—and affordability remaining a stubborn barrier for many young adults—it’s no surprise that more and more parents are stepping in to help their children enter the housing market.
Whether it’s gifting a down payment, co-signing a mortgage, or jointly purchasing a home, parental support is becoming a key part of the equation for first-time buyers.
For parents, this isn’t just about real estate. It’s about values. It’s about giving your kids a foundation. And in many cases, it’s about preserving or transferring family wealth in a smart, strategic way.
But here’s the catch: helping your children buy a home isn’t just a financial gesture. It’s a legal and tax event. And if not carefully structured, that kind gesture can come with unintended tax consequences—some of which may affect not only your child’s future, but your own retirement, estate plan, or CRA standing.
Below, we outline ten potential tax consequences that can arise in Canada when assisting your child with a home purchase—and why it’s so important to proceed with professional guidance.
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1. Capital Gains on Joint Ownership
If you co-purchase a home with your child and are listed on title—even if you don’t live there—you may be subject to capital gains tax on your share when the property is sold. Unlike your principal residence, a second property is not fully exempt from capital gains.
Why this exists:
The CRA wants to prevent people from using the principal residence exemption on multiple properties. Co-ownership with a child can blur those lines, so proper structuring is key.
2. Loss of Principal Residence Exemption
If you already own a home and co-own another with your child, you can only claim one as your principal residence. This may create confusion and prevent you from fully using the capital gains exemption on your own home.
Smart move:
If you're merely helping qualify for financing and don’t intend to own the property, legal structuring or trust arrangements may preserve your tax position.
3. Attribution Rules When Gifting Funds
When gifting money to a child for a down payment, the CRA generally does not tax the gift itself. However, if the funds are invested first—say, in a savings account or FHSA—the attribution rules may cause any income earned to be attributed back to you and taxed in your hands, depending on the child’s age and relationship.
What this means:
Don’t “park” funds in your child’s name unless you’ve clarified ownership and tax treatment. Income-generating gifts need to be handled carefully.
4. Risk to Spousal Rights in Divorce
If you give a large sum to your child and they buy a home without protecting it legally, that gift could be lumped into marital assets if the relationship ends. That means your family wealth could be unintentionally transferred to an ex-spouse.
Why it matters:
Canadian family law is designed to protect both partners—but it doesn't distinguish between your money and your child's once it's been gifted. Legal agreements (like cohabitation or prenuptial agreements) can help prevent this.
5. Impact on Your Estate Plan
If you give one child help now but intend to “even things out” in your will, you're creating what’s called an advancement—a pre-inheritance. If not documented, this can cause tension or even legal disputes among heirs.
Planning tip:
Consider formal documentation acknowledging the gift and whether it should be deducted from their inheritance. Better yet, coordinate this with your estate planner.
6. Tax Implications of a Loan vs. a Gift
If you structure the support as a loan (even with no interest), it must be documented properly. Otherwise, the CRA could question its legitimacy, especially if it’s later forgiven. Forgiven debts can potentially be viewed as taxable benefits or gifts.
Why the government cares:
Unstructured loans could be used to skirt income-splitting rules or avoid taxes on income from interest. Clarity and documentation are key here.
7. Eligibility Loss for First-Time Buyer Incentives
If a parent goes on title as joint owner, it may cause the child to lose eligibility for first-time homebuyer incentives like land transfer tax rebates or RRSP Home Buyers’ Plan benefits.
What’s behind this policy:
These incentives are meant for true first-time buyers. Adding a second, non-first-time owner complicates the situation. If you must be on title, explore legal alternatives like trusts or bare title ownership.
8. Gifted Funds Can Affect Tax Credits and Benefits
Large gifts may affect your child’s eligibility for needs-based benefits like the Canada Workers Benefit or student aid if their income or asset thresholds are affected. This is more relevant for younger children or students.
Behind the policy:
Programs are income-tested, and a sudden influx of assets—even from a parent—can change that picture. Discuss timing and format with a financial advisor.
9. GST/HST Housing Rebate Issues (for New Builds)
If you're helping your child purchase a new home from a builder, your involvement could impact their eligibility for the GST/HST new housing rebate. If you're on title but not living in the home, CRA may deny the rebate or require repayment.
Policy rationale:
The housing rebate is meant for people intending to live in the home. Non-occupying co-owners can void that benefit if not handled properly.
10. Unintentional Taxable Benefit if You Co-Sign Without Documentation
If you co-sign a mortgage and the lender considers your income in approval, but you have no legal interest or documentation of your role, the CRA may interpret your involvement as having provided a benefit—particularly if it leads to income-generating advantages (e.g. property appreciation or rental income).
Why this exists:
The government wants to prevent informal arrangements that allow one party to profit while avoiding tax reporting or accountability. Again, structure is everything.
Final Thoughts: The Best Help is Thoughtful Help
Most parents aren’t trying to dodge taxes or hide money—they’re trying to do the right thing. But good intentions don’t always translate into good outcomes if the planning is rushed or informal.
The Canadian tax system isn’t inherently “anti-family,” but it is designed to prevent loopholes and ensure fairness. That means, if you’re thinking about helping your child buy a home, the best move is to work with professionals: mortgage brokers, tax advisors, estate planners, and real estate lawyers who understand both the opportunity and the complexity.
Done right, your assistance can give your children the boost they need—while also safeguarding your wealth and your peace of mind.
