Do you pay tax on inheritance in Canada?

Canada has no inheritance tax or estate tax. Recipients (beneficiaries) do not pay tax on inherited money, property, or assets. However, the deceased person''s estate may owe taxes on a deemed disposition of capital assets (stocks, property, RRSPs/RRIFs) at fair market value at the time of death. These taxes are paid by the estate before distribution.

Is inheriting an RRSP or RRIF taxable in Canada?

If the RRSP/RRIF beneficiary is a surviving spouse or common-law partner, the funds can roll over tax-free into their own RRSP or RRIF. For all other beneficiaries, the full value of the RRSP/RRIF is included as income on the deceased''s final tax return and taxed at their marginal rate — potentially 50%+ on large amounts.

What happens when you inherit a house in Canada?

If the house was the deceased''s principal residence, there is no capital gains tax. If it was a secondary property (cottage, rental), capital gains tax applies on the increase in value from original purchase price to fair market value at date of death. This tax is paid by the estate. The beneficiary''s cost base becomes the fair market value at date of death.

Tax Implications of Receiving an Inheritance in Canada in 2026

How Inheritance Taxation Works in Canada

What Happens	Who Pays Tax	Tax Type
Cash inheritance	No one — cash is not taxed	None
Stocks/investments inherited	Estate pays on deemed disposition	Capital gains tax
Principal residence inherited	No one (principal residence exemption)	None
Cottage/rental property inherited	Estate pays on deemed capital gain	Capital gains tax
RRSP/RRIF to spouse	No one (tax-free rollover)	None
RRSP/RRIF to non-spouse	Estate pays tax on full RRSP/RRIF value	Income tax
TFSA inherited	Spouse: tax-free rollover; others: tax-free value at death	None (on value at death)
Life insurance proceeds	No one — tax-free to beneficiary if named	None
Business inherited	Estate may owe capital gains tax	Capital gains tax

Deemed Disposition at Death

When someone passes away in Canada, the CRA treats all capital assets as if they were sold at fair market value on the date of death.

Asset	Cost Base (Example)	FMV at Death	Capital Gain	Tax (at 50% inclusion, 40% marginal rate)
Stocks	$50,000	$150,000	$100,000	$20,000
Cottage	$200,000	$600,000	$400,000	$80,000
Rental property	$300,000	$700,000	$400,000	$80,000
Principal residence	$300,000	$800,000	$500,000	$0 (exempt)
RRSP ($400,000)	N/A	$400,000	N/A	$160,000+ (full income inclusion)

All taxes are paid by the estate before assets are distributed to beneficiaries.

RRSP/RRIF Inheritance Rules

Beneficiary Type	Tax Treatment
Surviving spouse or common-law partner	Tax-free rollover to their RRSP or RRIF
Financially dependent child/grandchild (under 18)	Can be transferred to a term annuity to age 18
Financially dependent child with a disability	Can be rolled to their RDSP or RRSP
Adult children, siblings, or other beneficiaries	Full RRSP/RRIF value taxed as income on deceased’s final return
Estate (no named beneficiary)	Full value taxed on final return; distributed after tax

TFSA Inheritance Rules

Beneficiary	Tax Treatment
Successor holder (spouse only)	TFSA transfers directly; remains tax-sheltered
Named beneficiary (spouse)	FMV at death is tax-free; contributed to their own TFSA as exempt contribution
Named beneficiary (non-spouse)	FMV at death is tax-free; any growth after death is taxable to beneficiary
Estate (no named beneficiary)	FMV at death is tax-free; growth after death taxable; goes through probate

Probate Fees by Province

Province	Probate Fee on $500,000 Estate	Probate Fee on $1,000,000 Estate
British Columbia	$6,658	$13,658
Alberta	$525	$525 (max)
Saskatchewan	$3,500	$7,000
Manitoba	$3,500	$7,000
Ontario	$7,250	$14,750
Quebec	$0–$65 (notarial will)	$0–$65 (notarial will)
New Brunswick	$2,500	$5,000
Nova Scotia	$5,578	$13,078
PEI	$2,000	$4,000
Newfoundland	$3,000	$6,000

Strategies to Minimize Estate Taxes

Strategy	How It Helps
Name beneficiaries on RRSP/RRIF/TFSA	Avoids probate; spouse beneficiary enables tax-free rollover
Joint ownership with right of survivorship	Property passes directly to survivor (bypasses estate)
Life insurance	Proceeds are tax-free and bypass the estate if beneficiary is named
Principal residence designation	Ensures no capital gains tax on primary home
Gift assets while alive	Triggers tax now (capital gains) but may be at a lower rate; reduces estate
Family trust	Useful for complex estates; consult a tax lawyer
Maximize TFSA during lifetime	TFSA growth is tax-free; successor holder keeps tax shelter

What to do when you receive an inheritance

Receiving an inheritance does not require any tax action by the beneficiary in most cases — but here are the key practical steps:

Cash inheritance: no tax to pay. If you deposit it into a non-registered investment account, future growth is taxable — consider using TFSA or RRSP room first.
Inherited stocks or investments: you receive the assets at their fair market value on the date of death (their new ACB). Track this carefully — when you eventually sell, your capital gain is measured from this inherited FMV, not the original cost.
Inherited RRSP or RRIF (non-spouse): the estate pays the tax on the full value, not you. You receive the after-tax amount. If you are named as a direct beneficiary, you receive the gross amount, but a T4A or similar slip is issued to the estate — confirm with the executor how the tax was handled.
Inherited TFSA (as successor holder or named beneficiary): the amount up to the FMV at death is tax-free to you. You can deposit it into your own TFSA using a special exempt contribution — but this requires a specific process with your TFSA issuer; do not delay.
Principal residence you inherit: you receive it at the deceased’s FMV on death. If you sell it soon after, there may be little or no additional capital gain. If you hold it and it appreciates, the gain from your ACB is taxable when you sell.

Provincial note: British Columbia and some other provinces may have provincial rules affecting estate administration — consult an estate lawyer if you are unsure.