Quote:
Originally Posted by lazypucker
Is it true that there is no inheritance tax in Canada. But let's say you inherit a house from your parents, you pay 0 tax, but when you sell it later, you will get taxed for capital gain?
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The person who dies gets hit with a pretty large tax bill so the overall inheritance amount in a sense gets taxed.
When one parent passes, the property gets passed directly to the surviving spouse with no tax. But when the second parent passes, it is called a deemed disposition.
Say the final parent passes away and owns:
$750,000 Primary Home (purchased for $300k)
$400,000 Second Home (purchased for $300k)
RRIF (RRSP): $500,000
Cash: $50,000
Life Insurance: $100,000
The Primary residence does not get taxed on capital gains. However the second home would have capital gains tax applied to the $100k appreciation in value from purchase.
The cash doesn't get taxed, but the value in an RRSP or RRIF would be taxed all at once so at a $500k value it would be taxed at the highest tax bracket and so quite a large portion of that money would be sent to CRA as a final tax return for the deceased individual.
Life Insurance Proceeds have no tax.