Updated Checked by the Tax-Services.ca editorial team How we check
Capital gains on inherited property are usually measured from the fair market value on the day the owner died, not from what they paid. The CRA says your cost is generally the deemed proceeds of disposition on the deceased’s final return, which is normally that value right before death. Only the growth after that date is yours to report.
Why is the starting value the date of death?
Tax law treats a person as having sold their capital property at death. The CRA’s page on taxable capital gains for someone who died puts it as property being disposed of immediately before death at fair market value, with the gain or loss reported on Schedule 3 of the final return. The gain that built up during their lifetime lands on their final return, and the estate deals with it there. You then take the property at that same value.
So a house bought in 1990 for $90,000 and worth $520,000 at death doesn’t hand you a $430,000 gain. Your cost is $520,000, and the earlier growth was the estate’s business. That’s why the date-of-death value matters so much. Get it wrong and every later number is wrong.
What does capital gains on inherited property look like in dollars?
Say you inherit a house valued at $520,000 at death. You sell it later for $650,000 and pay $30,000 in commission and legal fees. Your gain is $650,000 less $520,000 less $30,000, which is $100,000.
The CRA says fifty percent of a capital gain is taxable. So $50,000 goes on your return. In the capital gains tax calculator, with $60,000 of other income in Ontario, the extra tax is $15,242.64. That’s 15.2% of the gain, and you keep $84,757.36.
| Item | Amount |
|---|---|
| Sale price | $650,000 |
| Cost (value at date of death) | $520,000 |
| Selling costs | $30,000 |
| Capital gain | $100,000 |
| Taxable half | $50,000 |
| Extra tax, Ontario, $60,000 other income | $15,242.64 |
What if the house sells for less? Suppose the same property sells for $500,000 with the same $30,000 of costs. The result is $500,000 less $520,000 less $30,000, a loss of $50,000. That is a capital loss, and capital losses generally only offset capital gains, so it won’t reduce the tax on your salary. Still, report it, because it can be useful against a gain in another year.
Where do you get the date of death value?
Ask the executor first. If the estate hired an appraiser, or the property was valued for the final return, that report is your proof. If nobody did, you may need a written appraisal from a qualified appraiser, dated as close to the death as possible.
Keep it safe.
You don’t attach it when you file, but you’ll want it if the CRA asks how you got your cost, and by then the executor may have moved on and the appraiser may not remember the house. A guess from an online listing is a weak answer.
What if you lived in the house?
The main home is usually exempt from tax when you sell it, and the calculator says so too. But that applies to a home you lived in. A house you inherit and never occupy generally doesn’t get that treatment. On the final return, the CRA says the gain may be fully or partly exempt, but the sale still has to be reported on Schedule 3 with Form T1255. We did not confirm the detailed rules for a beneficiary who sells an inherited home, so read the CRA folio on principal residences before you count on the exemption.
The home sale proceeds calculator shows what you keep after commission, legal fees and any mortgage payoff. Use it to see the cash side while the tax side is worked out.
Do you owe tax the year you inherit?
Not on the inheritance itself. Canada has no inheritance tax, and the estate deals with the deemed sale on the final return. Your own tax event comes later, in the year you sell. That gives you room to plan. If the house sits empty for a year and you’re paying property tax, insurance and utilities while you decide, those carrying costs matter too, though whether they can be claimed is a separate question we haven’t confirmed here.
Take Priya, who inherits her mother’s condo in Burnaby. She lists it eight months later. She keeps the date-of-death appraisal, the sale agreement and the lawyer’s statement in one folder, and her accountant has everything in a day.
Mistakes and limits
People trip in three places. One is using the deceased’s original purchase price. Another is forgetting the selling costs, which reduce the gain. The last is assuming everybody inherits the same way.
The CRA says property passed to a Canadian-resident spouse or common-law partner can be rolled over, so the gain is deferred and the cost generally carries over, and qualified farm or fishing property going to a child can get special treatment. In those cases the cost may not be the value at death, so the example above doesn’t apply. Treat those situations as special ones and read the CRA page for them.
Estates can also owe provincial fees to get authority to handle the property. The estate administration tax calculator covers the Ontario one. It’s not income tax, and we left it out of the example above.
A big gain can push your other income into a higher bracket for the year. The marginal tax rate calculator shows what the next dollar costs you before you decide when to sell. If the timing is up to you, a year with lower other income leaves you more.
Our sources
The cost rule and the fifty percent inclusion come from Canada Revenue Agency pages on capital gains and on inherited property, checked in September 2026 and again in November 2026 on the CRA’s page for taxes after a death. The tax figures in the example come from our 2026 federal and Ontario tax tables and the calculator on this site.
Frequently asked questions
What is my cost for an inherited house?
The CRA says it is generally the deemed proceeds of disposition on the deceased’s final return, usually the fair market value just before death. If a house was worth $520,000 then and you sell it for $650,000 with $30,000 of selling costs, your gain is $100,000, not the growth since the original purchase.
How much of the gain is taxed?
The CRA’s capital gains guidance shows fifty percent of a capital gain as taxable. On a $100,000 gain, $50,000 goes on your return and is taxed at your normal rates. In our Ontario example with $60,000 of other income, the extra tax is $15,242.64. Check the CRA page again before you file.
Do I need an appraisal for an inherited property?
You need proof of the value at death. A report from the estate or a written appraisal from a qualified appraiser, dated close to the death, is the usual proof. You do not attach it when you file, but keep it, because the CRA can ask how you arrived at your cost.
Is a home I inherit tax free when I sell?
Not automatically. The main home exemption is for a home that was a principal residence, and a house you inherit and never live in generally does not get it. The CRA says the sale must still be reported on Schedule 3. We did not confirm the rules for inherited homes, so check the CRA folio.
Is it different when a spouse inherits?
Yes. The CRA says property passed to a Canadian-resident spouse or common-law partner can be rolled over, which defers the gain, and the cost generally carries over rather than resetting to the value at death. Qualified farm or fishing property going to a child can also be treated differently, so the example here does not apply.
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