Are you taxed on money you inherit? When a loved one passes, the last thing on most people’s minds is taxes, but they do play an important role in settling the Estate.
In Canada, there is no inheritance tax. You don’t have to pay taxes on the money you inherit, and you don’t have to report it as income. But this doesn’t mean the money you inherit is immune from taxation.
Why? The moment someone passes away, the Canada Revenue Agency (CRA) considers all their assets as part of their Estate and taxes this Estate directly, before any money is released to beneficiaries. In other words, the reason you don’t pay taxes on your inheritance is that it has already been taxed. Many of you may know this
1. The inheritance you receive is not taxable as it has already been taxed on your loved one’s final return and by your submission of Probate fees.
2. If you’re the legal representative of your deceased loved one, you may be responsible for amounts owing on the Estate, if you do not get the proper paperwork cleared with the CRA.
3. When a spouse or common-law partner inherits the Estate, many Estate taxes are deferred until they pass.
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This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.