Gifting Your Home To Your Kids – Rules in Ontario
Transferring ownership of your home to your children is a deeply personal decision that often comes from a desire to help them get ahead financially, avoid probate, or manage your estate while you're still alive. In Ontario, however, gifting property is not as simple as handing over the keys. There are tax implications, legal considerations, and provincial rules that you need to be aware of to avoid costly mistakes.
Get To Know Us
Here’s everything you need to know about gifting your home to your kids in Ontario, from capital gains tax to land transfer tax and more.
1. Canada Doesn’t Have a Gift Tax—But It’s Not Tax-Free
Unlike in some other countries, Canada doesn’t charge a “gift tax” when you give something of value to someone else. However, that doesn’t mean it’s tax-free—especially when it comes to real estate.
When you gift a home (or any property) to someone other than a spouse, the Canada Revenue Agency (CRA) considers it a “deemed disposition.” That means you’re treated as if you sold the property at fair market value (FMV) on the date of the gift—even if no money changed hands.
So if your home has increased in value since you bought it, you may owe capital gains tax on that appreciation.
2. Principal Residence Exemption (PRE)
The good news? If the home you’re gifting is your principal residence—meaning you lived in it for most of the time you owned it—you may not have to pay any capital gains tax. That’s thanks to the Principal Residence Exemption (PRE).
The PRE allows you to avoid capital gains tax on the full increase in value, provided the home was your principal residence for every year you owned it. This is especially beneficial if you’re gifting your primary home and not a rental or vacation property.
If, however, the home was a secondary property (like a cottage or investment property), you will owe tax on any capital gains since the time you acquired it.
3. What About Land Transfer Tax in Ontario?
In Ontario, when property is transferred, a land transfer tax (LTT) is usually payable. But in cases where property is gifted without any money changing hands, LTT is generally not applicable.
However, there’s a catch.
If your child assumes a mortgage or debt on the property, the value of that debt is considered “consideration” by the Ontario Ministry of Finance. That means LTT is calculated on that amount, and your child will be required to pay it—even if they didn’t pay anything else for the house.
How to avoid LTT when gifting:
Make sure the mortgage is fully paid off before transferring ownership.
Clearly document that the transfer is a gift with zero consideration.
4. What Happens to the Child’s Tax Situation?
After receiving the home, your child’s cost base (for tax purposes) becomes the fair market value at the time of the gift. This is important because it determines any capital gains they may face if they sell the property in the future.
If your child moves into the home and makes it their principal residence, they can likely use the PRE to shield themselves from capital gains tax later on.
If they rent it out or hold it as an investment, future appreciation will be taxable.
5. Can You Just Add Your Child to the Title?
Some parents try to avoid complications by adding their child’s name to the property title as a joint tenant. The idea is that when the parent dies, the property automatically passes to the child, avoiding probate.
But be warned: this still counts as a gift of part of the property, and the same deemed disposition rules apply. If the home has gained value, you’ll owe tax on the percentage of the home transferred.
Plus, adding someone to your title can expose the property to your child’s creditors, divorce settlements, or legal issues.
Always speak to a lawyer before pursuing this method.
6. Using a Trust for Gifting Real Estate
For more control, some parents consider using a family trust to hold the property. This strategy can delay the transfer of legal ownership while still planning ahead for succession.
However, trusts come with their own rules and costs. For example:
Trusts must report income and file annual tax returns.
After 21 years, most trusts face a deemed disposition of their assets, which can trigger capital gains.
This is a more advanced estate planning strategy and should only be set up with the help of a qualified lawyer and tax advisor.
7. Probate vs. Capital Gains
One reason parents consider gifting a home while still alive is to avoid probate fees later on. Probate in Ontario is calculated at 1.5% of the estate value above $50,000. So on a $1 million home, that could mean $15,000 in probate fees.
However, if gifting the home now triggers tens or hundreds of thousands in capital gains tax, it may not be worth it just to save on probate.
Always weigh the upfront tax liability against the future probate savings.
8. What If You Sell the House to Your Child for $1?
This is a common question, and unfortunately, it doesn’t help you avoid taxes.
Even if you “sell” the property for $1 or any amount below market value, the CRA will still treat the transaction as if it occurred at fair market value. You’ll be taxed on the full capital gain, but your child’s cost base will only be $1—which means they’ll face a huge capital gain later if they sell.
This creates a double tax hit—you pay on FMV, and your child pays on the difference between FMV and $1 when they sell. Avoid this strategy unless you really know what you’re doing.
9. Professional Advice is a Must
Because gifting real estate can trigger a complex combination of tax, legal, and family consequences, you should always speak to:
A real estate lawyer to handle the transfer properly and ensure LTT exemptions.
A tax professional to help calculate capital gains and report the transaction.
An estate planner if you want to explore trusts, joint ownership, or other succession options.
10. Final Thoughts
Gifting your home to your kids in Ontario can be a beautiful act of generosity and smart estate planning—but it must be done right.
Here’s a recap:
You may owe capital gains tax if the property has appreciated in value.
The Principal Residence Exemption can eliminate that tax if the home was your main residence.
Land Transfer Tax is generally avoidable—unless a mortgage is assumed.
Gifting below market value or using joint ownership can lead to unintended tax traps.
If you’re thinking about transferring property to your children, don’t leave it to guesswork. Consult professionals and understand the full financial and legal implications so you can make the most informed decision.
