Does Canada Have an Estate Tax? What Applies at Death

Canada doesn’t have an estate tax. What it has is income tax at death, charged to the estate on the deceased’s final return. The person who died is treated as selling their capital property at fair market value just before death, an RRSP or RRIF is generally added to their income, and all of it lands on a final T1 return. Provinces add probate fees, which Ontario calls the Estate Administration Tax. For how this fits with the US side of a family’s estate, start with our cross-border estate planning guide.

How does Canada tax someone who dies?

Through the final return. Under ITA 70(5), a person who dies is deemed to have disposed of each capital property “immediately before the taxpayer’s death” for proceeds equal to its fair market value. The gain over cost goes on Schedule 3 of the final return, and half of it is taxable under ITA 38(a).

• What it covers. The CRA lists real estate “such as homes and cottages”, investments like stocks, mutual funds or crypto-assets, and personal belongings like artwork or jewellery (CRA, taxable capital gains at death). The general meaning of the term is in our deemed disposition guide.
• The home. A principal residence still has to be designated on the final return, on Schedule 3 and Form T1255, even where the whole gain is exempt.
• The heirs’ cost. Whoever inherits is deemed to acquire the property at its fair market value immediately before the death (ITA 70(5)(b)). The CRA says the heir’s cost is usually “the FMV of the property right before the person’s death” (CRA, property you inherit). So there’s no tax on receiving an inheritance, and the heir starts fresh at that value.
• The TFSA. The holder is treated as receiving the TFSA’s value before death, but “no income should be reported by the deceased on the Final Return” (CRA, TFSA at death). Earnings after death are taxable to the beneficiaries.

How this compares with the US basis rule at death is in Canada’s deemed disposition vs the US step-up. What the heirs themselves owe is covered in inheritance tax in Canada.

Tax or fee at death	Who levies it	What it hits
Income tax on the deemed disposition, ITA 70(5)	Canada and the province, on the final T1	Half of the gain on capital property not left to a Canadian-resident spouse or spousal trust
Income tax on an RRSP or RRIF, ITA 146(8.8) and 146.3(6)	Canada and the province, on the final T1	The plan’s fair market value at death, unless it passes to a spouse in a way the rules allow
T3 return tax	Canada and the province, on the estate’s T3	Income and gains the estate earns after the death
Estate Administration Tax (Ontario)	Ontario, when an estate certificate is issued	$15 per $1,000 of estate value over $50,000
US estate tax	The United States	US-situated property of a Canadian resident, such as a Florida condo or US shares

Is there a spousal rollover at death in Canada?

Yes. ITA 70(6) switches off the deemed sale for property that passes to a spouse or common-law partner, or to a qualifying spousal trust, as long as the deceased was resident in Canada immediately before death and the spouse was too (the trust has to be resident in Canada after the property vests). The property moves at the deceased’s tax cost, and the gain waits until the spouse sells or dies.

• Timing. The property has to vest in the spouse or trust within 36 months after the death, or a longer period the Minister accepts on a written application made inside that window.
• The trust conditions. The spouse must be entitled to all of the trust’s income for life, and no one else may receive or use its income or capital while the spouse is alive.
• Electing out. The CRA says the legal representative can elect out “on a property-by-property basis” in the final return (CRA). That can make sense when the deceased has unused losses or low income in the year of death.

What happens to an RRSP or RRIF when you die?

Its value generally goes into the deceased’s income for the year of death. ITA 146.3(6) deems the last annuitant of a RRIF to have received, immediately before death, the fair market value of the fund. ITA 146(8.8) does the same for an RRSP. Unlike a capital gain, the whole amount is income.

• The spouse exception. For an unmatured RRSP, if all of it is paid to the surviving spouse and transferred directly to their RRSP, RRIF or an eligible annuity before the end of the year after the death, the CRA says no T4RSP slip is issued in the deceased’s name and the spouse reports the payment and claims a matching deduction (CRA, RRSP at death). A RRIF can also continue to the spouse as the new annuitant (CRA, RRIF at death).
• Children as beneficiaries. When the plan goes to anyone else, the value is generally taxed on the final return even though the money goes straight to the named beneficiary. One narrow exception is a rollover to the RDSP of a child or grandchild who was financially dependent on the deceased because of an impairment.
• Growth or decline after death. Growth after death is taxed to the beneficiary or estate when paid. If the plan falls in value before it’s paid out, the representative can ask to deduct the decline on the final return, generally where the final distribution happens by the end of the year after the death.

When the beneficiary lives in the US, the plan raises its own questions, covered in RRSP and RRIF on death for a US-person beneficiary.

Is probate a tax in Ontario?

Yes. Ontario charges an Estate Administration Tax “on the value of the estate of a deceased person if an estate certificate is applied for and issued” (Ontario, Estate Administration Tax). It’s paid as a deposit with the application to the Superior Court of Justice, and if no certificate is applied for or issued, no tax is owed. Other provinces have their own probate fees; this guide only covers Ontario’s.

• The rate. For applications on or after January 1, 2020, there’s no tax on an estate of $50,000 or less. Above that, it’s $15 for every $1,000, or part of $1,000, of the value over $50,000. The value is rounded up to the next thousand.
• What counts. Ontario real estate less mortgages on it, bank accounts including foreign ones, investments, vehicles and other property wherever it sits. Funeral costs, legal fees, credit cards and lines of credit can’t be deducted.
• What’s left out. Real estate outside Ontario, assets held jointly that pass automatically to the other owner, insurance paid to a named beneficiary, and an RPP, RRSP, RRIF or TFSA with a beneficiary designation.
• Multiple wills. Where the court issues a certificate limited to the assets in one will, only those assets count in the value.
• The follow-up return. The estate representative files an Estate Information Return with the Ministry of Finance within 180 calendar days after the certificate is issued.

Planning around these fees, and the cross-border layer, is in our Ontario probate fees guide.

What returns does the executor file, and when?

A final T1 return is required for everyone who dies, and the CRA sets its due date by the date of death: April 30 of the following year for a death between January 1 and October 31, and six months after the death for a death between November 1 and December 31 (CRA, filing and payment due dates). If the deceased or their spouse ran a business, the filing date is generally June 15 of the following year (six months after the death for a death after December 15), but the payment date doesn’t move.

• Optional returns. Up to three optional T1 returns can split certain income off the final return so credits are claimed more than once: rights or things (marked 70(2)), a partner or proprietor (150(4)), and income from a graduated rate estate (104(23)(d)) (CRA, what returns you need to file). Rights or things don’t include capital gains, and that return is due by the later of one year after death and 90 days after the final return’s assessment.
• The estate’s T3. Income the estate earns after the death goes on a T3 return, due 90 days after the trust’s tax year-end. Most estates qualify as a graduated rate estate for up to 36 months, which taxes their income at graduated rates.
• Paying over time. Tax on the deemed disposition and on a rights or things return can be deferred with acceptable security and Form T2075, with interest running.
• Clearance certificate. Before distributing, the representative can ask for a clearance certificate on Form TX19. Without one, the CRA says the representative is “personally liable for unpaid amounts, up to the value of the amount of assets distributed” (CRA, clearance certificate).

Do Canadians pay US estate tax on US property?

They can. A Canadian resident who isn’t a US citizen can owe US estate tax on US-situated property, such as a Florida condo or shares of US companies. The statute gives that estate a credit of $13,000 (IRC 2102(b)(1)), which covers a $60,000 taxable estate. The treaty lets the estate of a Canadian resident claim instead a prorated share of the citizen’s credit (Article XXIX B(2)), which for 2026 deaths runs off a $15,000,000 basic exclusion.

• Filing. The executor files Form 706-NA when the US-situated assets, plus certain prior gifts, exceed $60,000, within 9 months after the death (Instructions for Form 706-NA).
• Relief on the Canadian side. Under Article XXIX B(6), US estate tax on property in the US can be deducted from the Canadian tax for the year of death on income and gains arising in the US, such as the deemed gain on that condo, which the treaty treats as arising in the US (Article XXIV(3)(a)), and, where the worldwide gross estate is over US$1.2 million, on income and gains from US property such as US shares.
• The full mechanics. The fraction, the marital credit and the small-estate rule are worked through in US estate tax for Canadians: the $60,000 exemption vs the treaty.

A US citizen who lives in Canada is in a different position: the US taxes the worldwide estate, not just the US property. That case is covered from the estates and trusts hub.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.