How Much Is Inheritance Tax in Ontario? Facts & Guide
Many people in Ontario expect to pay a fee on money or assets received from an estate. Ontario does not charge any inheritance tax, so beneficiaries do not pay tax on what they inherit.
This means that what you receive from an estate is generally tax-free.
The estate itself must handle certain taxes before distributing assets. The main cost is the Estate Administration Tax (probate fees), which is about 1.5% of the estate's value over $50,000.
The estate also pays income taxes on any earnings or final income of the deceased.
Understanding these details shows that while inheriting money is tax-free, estate taxes can affect what is passed on. This overview helps explain taxes related to inheritance in Ontario.
Is There Inheritance Tax in Ontario?
People often ask if they must pay inheritance tax when they receive money or property after someone dies. In Ontario, tax rules are different from other places.
The estate may owe taxes before any money goes to beneficiaries, but people who inherit usually don’t pay tax on what they receive.
Differences Between Inheritance Tax and Estate Administration Tax
Ontario does not have a true inheritance tax. When we inherit money or property, we do not owe taxes directly on those assets.
The estate of the person who died may have to pay the Estate Administration Tax (EAT), also called probate tax.
EAT is based on the value of the estate’s assets at death. It is about 1.5% of the estate value over $50,000.
This tax must be paid before the estate can be fully distributed to heirs.
The Canada Revenue Agency (CRA) requires the estate to pay income taxes on any income earned before distribution. These are separate from EAT and are the final income taxes of the deceased and on any estate income.
These payments reduce the total estate but are not charged to the beneficiaries.
Impact on Beneficiaries
Beneficiaries in Ontario do not pay inheritance tax. Money or property passed to heirs is not considered taxable income by the CRA, so we do not report it on our own tax returns.
The estate pays the Estate Administration Tax and any income taxes first, so the total amount we inherit can be smaller than the estate’s full value. Jointly held assets or assets with designated beneficiaries, like life insurance, usually pass outside the estate and are not subject to EAT.
While we won’t pay taxes personally on inheritances, the size of the estate after tax may affect how much we receive. Proper planning can help reduce these costs and protect more for us as beneficiaries.
How the Estate Administration Tax Works
Estate administration tax in Ontario is based on the total value of the deceased’s estate, which must be properly assessed. The tax is paid when applying for an estate certificate from the Superior Court of Justice.
Knowing the tax rates, how to calculate the estate’s value, and when this tax applies is crucial to managing the estate effectively.
Current Estate Administration Tax Rates
The tax rate in Ontario is $15 for every $1,000 or part of the estate’s value exceeding $50,000. No tax applies on the first $50,000.
For example, if the estate value is $240,000:
No tax on the first $50,000
$15 × 190 (for $190,000 over $50,000) = $2,850 tax
For estates valued $50,000 or less, no tax is charged but an Estate Information Return must still be filed. The tax deposit is paid when applying for an estate certificate at the Superior Court of Justice and becomes the final tax upon issuance.
Calculating the Value of an Estate
We calculate an estate’s value using the fair market value of all assets owned at the time of death. This includes real estate in Ontario, bank accounts, vehicles, investments, and other property regardless of location.
Certain assets like jointly owned property that automatically pass to another owner or assets with named beneficiaries are excluded. Debts like funeral costs, legal fees, or mortgages may not reduce the estate’s value except for mortgages against real estate.
Supporting documents like appraisals or statements are needed to prove asset values, especially for complex or unusual assets.
When the Tax Applies
The Estate Administration Tax applies only when the estate requires an estate certificate from the Superior Court of Justice. This usually happens when dealing with real estate, bank accounts, or other assets that need legal authority for transfer.
If no estate certificate is applied for or issued, no tax is due. Certain certificates, like those appointing a succeeding estate trustee, are exempt from the tax.
The estate pays the tax when applying for the estate certificate before assets can be distributed.
Assets Included and Excluded from the Estate Value
We need to know which assets are counted in the estate’s total value and which are not. This affects how much tax the estate owes.
Some assets, like investments and bank accounts, are always included. Others, such as certain jointly held property or assets with named beneficiaries, may be excluded.
Real Estate and Principal Residence
Real estate owned solely by the deceased is included in the estate’s value at fair market value on the date of death. This includes any property not held jointly or separated by legal agreement.
If the property is a principal residence, the estate may benefit from the principal residence exemption, which can reduce or eliminate capital gains tax on that property. This does not affect Estate Administration Tax, which is calculated on the full value of the property.
Real estate held jointly with right of survivorship generally passes outside the estate and is not subject to probate fees.
Investments and Bank Accounts
Investments such as stocks, bonds, mutual funds, and other capital property owned by the deceased are included in the estate’s value. We calculate these based on their fair market value at the date of death.
Bank accounts solely in the deceased’s name are also part of the estate. These accounts are subject to Estate Administration Tax and any applicable income taxes on gains.
Income generated by these investments between death and estate distribution is taxable to the estate, not the beneficiaries.
Jointly Held Assets and Beneficiary Designations
Assets held jointly with rights of survivorship, such as a home owned with a spouse or common-law partner, pass directly to the surviving co-owner. These assets bypass probate and are excluded from the estate value for tax purposes.
Assets with named beneficiaries like life insurance policies or registered accounts (RRSPs, RRIFs) do not form part of the estate if the beneficiary designation remains valid.
These exclusions can significantly reduce probate fees and simplify estate administration.
| Asset Type | Included in Estate Value | Notes |
|---|---|---|
| Solely owned real estate | Yes | Fair market value at death |
| Principal residence | Yes | Eligible for capital gains exemption |
| Jointly held property | No | Passes outside the estate |
| Investments and bank accounts | Yes | Valued at fair market value |
| Assets with named beneficiaries | No | Excluded if beneficiary remains valid |
Inheritance Tax Exemptions and Deductions
We need to understand key exemptions and deductions that can affect the taxes related to an estate in Ontario. Some items can reduce the amount owed after someone passes.
These include specific estate fees, property exemptions, and capital gains rules that help protect certain assets from tax.
Estate Administration Tax Exemptions
In Ontario, an Estate Administration Tax must be paid when managing an estate. Certain estates qualify for exemptions.
Estates valued under $50,000 do not owe this tax, so small estates avoid paying this fee altogether.
If the estate holds a mortgage payable to a spouse or charity, this can reduce the taxable value used to calculate this tax. If the estate is transferred directly to a surviving spouse, the tax can be delayed until the spouse passes or sells the assets.
Knowing what qualifies for exemption helps us reduce upfront costs in managing an estate and ensures more funds go directly to the beneficiaries.
Principal Residence Exemption
The Principal Residence Exemption allows us to avoid paying capital gains tax on the sale of a primary home. If the deceased’s main home is passed to heirs, the increase in value of this property is typically exempt from tax.
This exemption only applies if the property was the principal residence for each year it was owned. If part of the property was rented out or used for business, the exemption might be reduced.
Using this exemption helps preserve family homes without reducing their value through tax. It is important to document ownership and use properly to qualify fully.
Lifetime Capital Gains Exemption
The Lifetime Capital Gains Exemption (LCGE) lets us reduce or eliminate capital gains tax on certain qualifying properties during the deceased’s lifetime or on transfer after death. This exemption mainly applies to small business shares and some types of farm or fishing property.
The LCGE amount is set by the Canadian government and increases over time with inflation. For 2025, this exemption is over $900,000 for qualified small business shares.
Using the LCGE requires careful planning and meeting specific eligibility rules. This exemption is crucial for business owners and farmers to protect their assets from heavy taxes upon death or sale.
Taxation of Capital Gains and Other Assets Upon Death
When someone passes away in Ontario, the Canada Revenue Agency (CRA) treats their assets as if they were sold at fair market value right before death. This can create a tax on any increase in value, called a capital gain.
Different rules apply depending on the type of asset, including investments, property, and registered accounts.
Deemed Disposition and Fair Market Value
Upon death, all capital property is considered to have been sold at its fair market value (FMV) immediately before passing. This is called deemed disposition.
The FMV is used to calculate the capital gain or loss by comparing it to the property's adjusted cost base (what the original owner paid). Any capital gain realized is 50% taxable and added to the deceased’s final income tax return.
This rule means the estate must pay taxes on gains accrued during the deceased’s lifetime, even if the property was not actually sold. Certain exceptions apply, such as property passed to a spouse, which may qualify for a rollover deferring the tax.
Capital Gains on Investments and Property
Investments like stocks and mutual funds, and real estate that is not a principal residence, are subject to capital gains tax after deemed disposition. If the property was a principal residence, the capital gain is generally exempt from tax under the principal residence exemption.
For rental properties, cottages, or other investment properties, the estate pays tax on the increase in value from the original purchase to the FMV at death. Any future gain or loss after the beneficiary inherits the property is only taxable when they sell it.
The tax on these gains can be significant and can reduce the value of the estate left to heirs.
Treatment of Registered Accounts
Registered accounts such as RRSPs and RRIFs are taxed differently. Unlike capital property, registered accounts are usually fully included as income in the year of death.
The total value of these accounts at death is added to the deceased’s final income tax return and taxed at their marginal rate. Transfers to a spouse or a financially dependent child may allow for tax deferral or reduction.
Because these accounts do not receive the principal residence exemption or capital gains treatment, proper planning is important to reduce tax impact.
Estate Administration Process in Ontario
When a person passes away, we must manage their estate through a formal legal procedure. This includes getting court approval to handle the estate and reporting on the estate’s assets and debts.
The process involves following specific steps in the right order and submitting required documents within set time limits.
Handling an estate after a loved one’s passing? Our comprehensive Executor Checklist Ontario: Steps for Estate Administration explains the key tasks and helps you understand the probate process.
Applying for a Certificate of Appointment of Estate Trustee
To manage a deceased person’s estate in Ontario, we usually need to apply for a Certificate of Appointment of Estate Trustee.
This certificate gives us the legal authority to collect, manage, and distribute the estate’s assets. We apply for this at the Superior Court of Justice.
We submit an application that includes the will (if there is one), an estimate of the estate’s value, and other required forms.
The Estate Administration Tax must be paid when filing this application. If the estate is valued at $50,000 or less, no tax is due.
For larger estates, the tax is $15 per $1,000 above $50,000.
If the court approves the application, it issues the certificate.
Without this certificate, banks and other organizations may refuse to release funds or transfer property.
Filing the Estate Information Return
After we receive the certificate, we must file an Estate Information Return with the Ministry of Finance.
This return reports the final value of the estate’s assets and confirms payment of the Estate Administration Tax.
We need to file this return within 180 calendar days after receiving the certificate.
We can file online, by mail, fax, courier, or in person. Supporting documents must be kept for at least four years.
If the estate’s value changes after filing or if new assets are discovered, we must file an amended return with updated information within 60 days of the change.
Role of the Superior Court of Justice
The Superior Court of Justice oversees the estate administration process.
It issues the certificate, which legally empowers us to act on behalf of the estate. The court also handles disputes about the will or estate distribution.
We interact with the court when submitting applications and requests related to the estate.
We pay the Estate Administration Tax to the court when applying for the certificate.
The court can issue different types of certificates depending on the estate situation, such as for a small estate or when litigation is involved. This may affect tax obligations and procedures.
Estate Administration Timeline
The estate administration process begins with applying for the certificate and usually finishes after filing the Estate Information Return.
We have 180 calendar days after the certificate is issued to complete the return.
If any errors or changes are found, we must file amended returns within 60 calendar days.
It’s important to meet these deadlines to avoid penalties.
The overall timeline can vary based on the estate’s complexity, the presence of a will, and any court disputes.
Staying on schedule ensures proper management and legal compliance in handling the estate.
Special Considerations and Unique Scenarios
Certain situations affect how estates are handled and taxed in Ontario.
These cases involve special rules tied to relationships and assets that can impact financial outcomes and legal responsibilities.
Inheritance for Surviving Spouse or Common-Law Partner
In Ontario, a surviving spouse or common-law partner usually benefits from favourable treatment in estate matters.
There is no inheritance tax for spouses or partners when they receive property from the deceased’s estate.
The estate might owe taxes before transferring assets. For example, the estate may have to pay capital gains tax on certain assets as if they were sold right before death.
The spouse can then inherit assets at their fair market value without immediate tax.
The spouse also has rights under the Succession Law Reform Act, including the right to claim a family law property claim or a support entitlement.
This can affect how the estate is divided and administered.
Treatment of Financially Dependent Children
Children who are financially dependent, including minors or those with disabilities, require special consideration during estate administration.
The law aims to protect their financial interests.
When a financially dependent child is involved, the estate’s executor must ensure the child’s needs are met.
This sometimes involves setting up trusts or holding funds in trust until the child reaches an appropriate age or becomes financially independent.
Although Canada does not impose inheritance tax, the executor must handle tax filings and possible income tax on investment earnings within trusts.
This adds complexity in managing the estate for the child’s benefit.
Estates with Foreign Assets
Estates that include foreign assets bring extra tax and legal considerations.
While Ontario does not tax inheritance itself, foreign property can create tax obligations abroad or complicate estate administration.
We need to consider tax treaty rules between Canada and other countries to avoid double taxation.
The estate may face probate or inheritance fees in the foreign jurisdiction and must comply with local reporting requirements.
Canadian estate administrators should also be aware of deemed disposition rules that may apply to foreign property, which could create capital gains tax liability.
Careful planning and professional advice are important when foreign assets are part of the estate.
Conclusion
In Ontario, there is no direct inheritance tax for beneficiaries. The estate may owe an Estate Administration Tax based on the total value of assets.
Estates valued at $50,000 or less do not pay this tax. For estates above this threshold, the tax is $15 per $1,000 of value above $50,000.
Understanding these taxes and the probate process can be complex.
We recommend consulting with experts to ensure proper estate planning and compliance with all legal requirements.
This helps protect your assets and makes the administration smoother for everyone involved.
Contact B.I.G. Probate Law Ontario for clear guidance on inheritance and estate matters.
You can reach us at Info@probatelaw-ontario.ca or call (289) 301-3338.
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Frequently Asked Questions
We know that inheritance involves several financial details.
Some taxes apply to the estate but not directly to the people who receive the inheritance. Understanding these specifics helps us plan better and avoid surprises.
How much can you inherit without paying taxes in Canada?
In Canada, beneficiaries do not pay any inheritance tax on what they receive.
We can inherit any amount without owing taxes directly on the inheritance. Taxes apply to the estate, not the inheritors.
How to avoid inheritance tax in Ontario?
Ontario does not have a true inheritance tax for beneficiaries.
Proper planning, such as joint ownership of assets or gifts before death, can reduce the taxes from the estate. These strategies can lower estate administration fees and income taxes owed by the estate.
Do beneficiaries pay tax on inheritance in Ontario?
No, beneficiaries in Ontario do not pay tax on the inheritance they receive.
Any taxes are paid by the estate before distribution. We only pay taxes if we sell inherited assets and have capital gains.
How much is probate tax in Ontario?
The probate tax, also called Estate Administration Tax, is about 1.5% of the estate's value over $50,000.
The first $50,000 is exempt. For example, a $300,000 estate could owe approximately $3,750 in probate fees.
What is the maximum amount you can inherit without paying taxes?
There is no maximum limit on how much we can inherit without paying taxes in Ontario.
The inheritance itself is not taxed. Only the estate may owe taxes before the assets are passed on.
How much does an estate have to be worth to go to probate in Canada?
In Ontario, estates worth more than $50,000 usually require probate.
Estates below that amount may avoid probate.
Probate confirms the will and allows the legal transfer of assets.