Buying a House for Your Child to Rent – Rules & Considerations in Ontario

With the cost of living on the rise and real estate prices continuing to climb across Ontario, many parents are stepping in to help their children enter the housing market. One increasingly common solution? Buying a house and letting their child live in it—either rent-free or as a tenant.

But before you jump into this generous arrangement, it’s important to understand the legal, tax, and financial rules that apply. In Ontario, buying a property for your child to rent or live in isn't just a family decision—it’s also a real estate transaction with specific implications that can affect your taxes, mortgage terms, and even how you’re treated by the CRA (Canada Revenue Agency).

Whether you're thinking about helping your child avoid high rental rates, planning to turn the home into a long-term investment, or gifting the property down the road, here's everything you need to know to avoid unexpected penalties and make the most of the opportunity.


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1. Who Owns the Home Legally and for Tax Purposes?

If you, the parent, purchase the house in your name (whether with or without a mortgage), you’re the legal owner. That means:

  • You are responsible for the property taxes and capital gains taxes (if/when the property is sold).

  • You are the one who must declare any rental income earned—even if your child is the tenant.

  • The property is considered an investment property, not a principal residence (unless you also live there).

If your child pays you rent, you must report this rental income on your tax return, just like any landlord would. You can claim expenses like utilities, maintenance, insurance, and mortgage interest—but you’ll also pay tax on any profit.

2. What About Below-Market Rent or No Rent at All?

If you're not charging your child market rent (or charging no rent), the CRA may not consider this a true rental property. In that case:

  • You cannot deduct expenses (like repairs, insurance, utilities, or mortgage interest).

  • You still pay capital gains tax on appreciation when the property is sold, because it’s not your principal residence.

  • You may not be able to treat it as a business for income tax purposes.

The CRA draws a hard line: if the arrangement is more personal than commercial, you can't deduct expenses, even if you’re paying out of pocket.

3. Using a Mortgage to Buy the Home

If you need a mortgage to purchase the home for your child:

  • The lender will usually treat this as an investment property mortgage, not a principal residence mortgage. These typically have higher interest rates and down payment requirements (often 20%+).

  • Some lenders offer “family mortgages” or co-signer arrangements that allow you to qualify while your child lives there.

Make sure to disclose the intent to the lender. If you tell the lender it’s owner-occupied when it's not, that’s considered mortgage fraud.

4. Buying the Home in Your Child’s Name (With or Without Co-Signing)

Some parents want to buy the house in their child’s name to help them build credit and equity. This can be done in a few ways:

a. You Co-Sign the Mortgage:

  • You help your child qualify by adding your name to the loan application.

  • Your child is the owner, and the home is their principal residence, meaning no capital gains taxes for them later.

  • If they make the payments, great. But if they default, you’re legally responsible.

b. You Gift or Loan the Down Payment:

  • You can give your child money toward the down payment. Keep documentation in case CRA asks whether it’s a gift or a loan.

  • A gift could impact your own future eligibility for certain benefits or estate planning.

5. Tax Implications – Capital Gains, Attribution, and Principal Residence

If you own the home and later sell it, you’ll likely face capital gains tax on any increase in property value, because it wasn’t your principal residence.

If you eventually gift or sell the home to your child, the CRA considers it a “deemed disposition” at fair market value. You may owe tax at that point too.

Also, under the attribution rules, if your child is a minor and pays rent or earns rental income from the home, that income could be attributed back to you and taxed in your hands.

6. What If You Want to Gift the Home to Them Later?

Gifting the house to your child after a few years is possible, but it’s still considered a disposition for tax purposes:

  • You’ll owe tax on any capital gains.

  • Land Transfer Tax may apply unless it’s a no-consideration gift and no mortgage is assumed.

You can’t avoid this by "selling it for $1"—the CRA still uses the fair market value for tax calculations.

7. Legal and Practical Considerations

  • Tenant Rights: Even though it’s your child, Ontario’s Residential Tenancies Act still applies if they’re paying rent. You technically become their landlord and are subject to tenant protections and rent increase limits.

  • Insurance: Make sure the property is insured appropriately—as an investment property or family-occupied dwelling.

  • Estate Planning: If you plan to gift or will the home to your child later, structure ownership and estate documents accordingly.

✔️ Summary: Key Points to Remember

AspectDetailsOwnershipParent owns = investment property; child owns = principal residence (if they live in it).RentCharging fair rent = report income; low/no rent = no deductions, still capital gains on sale.MortgageLikely treated as investment mortgage, not primary residence. Higher down payment required.TaxNo gift tax in Canada, but capital gains and rental income rules apply.LegalRental rules apply even if renting to family. Use legal agreements if needed.Long-TermPlan ahead for gifting, probate, estate taxes, and property succession.

🔍 Final Thoughts

Buying a house for your child in Ontario to live in and/or pay rent is a generous act—but it’s not without red tape. Whether it’s for university housing, helping them build equity, or securing their financial future, make sure you understand:

  • The tax and ownership rules

  • The mortgage and financing implications

  • The legal structure that best fits your goals

Consult a real estate lawyer and tax accountant to structure the purchase properly. A well-planned strategy can save your family thousands in taxes, legal fees, and future disputes.

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David Pipe

David Pipe helps business owners, investors, and first-time homebuyers build and protect family wealth with creative financing and tax-efficient life insurance solutions. He is an award-winning mortgage agent and life insurance agent in Ontario. David believes education in personal finance and seeking great advice is the best way to reach our financial goals, and he is focused on sharing his knowledge with others. He lives in Guelph, Ontario with his wife Kate Pipe and their triplets (and english bulldog Myrtle).

https://www.wealthtrack.ca/about#about-david-pipe
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Gifting Your Home To Your Kids – Rules in Ontario