Updated Checked by the Tax-Services.ca editorial team How we check
If you give away a house, a cottage or land in Canada, the CRA treats it as if you sold it at fair market value. That means capital gains on gifted property fall to the giver, even though no money changed hands. The main exceptions are a gift to a spouse or common-law partner and a home that was your principal residence the whole time.
Who pays tax when you give property away?
You do. The person who receives the gift doesn’t pay tax on getting it. Whoever gives it reports the gain on a return for the year of the gift.
The CRA is blunt about it. Its page on transfers of capital property says:
you are considered to have sold it at its fair market value (FMV) at the time you give the gift.
Transfers of capital property, canada.ca
The same idea applies when you sell to a family member for a token amount. If you and the buyer aren’t at arm’s length and your price is below market value, the CRA uses the market value instead. So a $1 sale to your daughter doesn’t work as a way around it.
What does a gift cost in tax?
Take a property worth $700,000 that you bought for $300,000, with no selling costs. The gain is $400,000, and half of it, $200,000, counts as income. That half is the taxable part under the inclusion rate the CRA guide gives as one half. We haven’t found a CRA page that confirms the rate for 2026 by name, so check it on the day you file.
With $60,000 of other income, the capital gains tax calculator shows $84,852.02 of extra tax in Ontario, or 21.2% of the gain. In Alberta the same gift costs $74,374.32, or 18.6%. The gap comes from the provinces’ rates, and the gain itself is identical.
Nothing came in, yet the bill is large. That’s what catches families out. Plenty of people plan the gift and forget the tax until the accountant calls. Picture Margaret in Barrie, who wants to hand the family cottage to her two sons while she’s still around to see them enjoy it. The gesture is lovely. The tax bill for the year of the gift lands on her, and she’ll need to know how she’d pay it before the transfer goes through.
Which gifts don’t trigger a gain?
| Situation | What the CRA says |
|---|---|
| Gift to spouse or common-law partner | Generally no gain or loss for you |
| Gift to a child or other relative | Treated as a sale at fair market value |
| Sale to a relative below market value | Your price is deemed to be market value |
| Property that was your principal residence every year you owned it | No tax on the gain, if you report it |
| Farm or fishing property to a child | Special deferral rules may apply |
What happens when you give property to a spouse?
Here the gain gets pushed forward instead of taxed. Your spouse takes over your cost, so the gain is still there, waiting. If your spouse later sells while you’re both still Canadian residents and together, the CRA generally makes you report that gain, not your spouse. This attribution rule catches people who thought they’d split income by moving an investment property to the lower earner.
So the gift can move ownership, but it doesn’t move the tax bill. To see how much a higher earner pays on the next dollar, the marginal tax rate calculator gives a quick idea.
You can also choose out. The same CRA page says the person making the transfer may elect, in the return for that year, not to have the spousal rules apply. Then the transfer is a sale at fair market value after all. That only makes sense in narrow cases, for instance when you’d rather use up a loss or a lower tax year now, so talk it through with an accountant first.
Can the principal residence exemption cover a gifted home?
Sometimes. If the property was solely your principal residence for every year you owned it, you don’t pay tax on the gain. Only one home per family can be designated for any one year, and family means you, your spouse or partner and your dependent children.
Since 2016, the CRA allows the exemption only if you report the disposition and the designation. That means Schedule 3 and Form T2091(IND) with your return. Skip the reporting and you can lose an exemption you were entitled to.
A cottage counts too, but it competes with the family home for the same years. If part of the property earned rent, you split the price and cost between the residential part and the rest, and the exemption covers only the residential part.
Mistakes to avoid before you sign
Guessing the market value is the big one, and it’s easy to do. The CRA uses fair market value, so get a written appraisal and keep it. Another is forgetting that the gain arrives on your return in the same year, when the bill may be due with no sale money to pay it. Working out your net cash after a real sale is easier with the home sale proceeds calculator, though it can’t model a gift.
We couldn’t confirm the recipient’s cost base for non-spouse gifts from the pages we used, so check that before the recipient sells anything later. And if the gift is a tricky case such as a farm or a trust, the CRA rules are long, so read the transfer pages or ask an accountant who does family transfers.
Sources, and how we checked them
The rules above come from the Canada Revenue Agency‘s guidance on capital gains, transfers of capital property and the principal residence, for the 2025 tax year. The tax estimates come from this site’s calculator, which uses 2026 federal and provincial rates. The lifetime exemption for small business and farm property is an option you switch on. This site isn’t affiliated with the CRA.
Frequently asked questions
Do I pay tax if I give my house to my child?
The CRA treats it as a sale at fair market value, so you may report a capital gain. The principal residence exemption can wipe it out if the home was your principal residence for every year you owned it.
Does the person who receives the gift pay tax?
Not on receiving it. The tax falls on the giver, who reports the gain on their own return.
Is a gift to my spouse taxed?
Generally no gain or loss arises when you give capital property to a spouse or common-law partner. The gain is deferred, and later sales can be taxed to you under the attribution rule.
What if I sell to my son for less than the property is worth?
If you don't deal at arm's length and the price is below fair market value, the CRA treats your price as the market value.
What do I file to claim the principal residence exemption?
You report the disposition on Schedule 3 and the designation on Form T2091(IND). Since 2016 the CRA allows the exemption only if you report both.
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