Taxability of gifts to family members clarified.
Allan Madan, CPA, CA
Taxation on gifts to family members can be tricky. Usually the recipient does not have to pay taxes but the person who gives the gift might face personal taxes. There are a couple of tips that you can take to minimize or avoid taxes such as not giving gifts that can increase in value.
You are probably asking yourself are gifts given to family members taxable. Family members do not pay tax on gifts received. However, the person giving the gift could be subject to personal taxes. This is because the Canada Revenue Agency treats property gifted as being sold for its fair market value. If the property has gone up in value, a taxable capital gain will be included in the income of the person giving the gift. Here are two valuable tips:
First, don’t gift property that has gone up in value because that could trigger taxable capital gains. Second, gift stocks, bonds, mutual funds, and real estate to your children if a) you have recently purchased a property and b) you expect the property to go up in value over time.
When your child eventually sells the property, any profits and gains will be included in your child’s income. Because your child is likely in a low tax bracket, the profits will not attract a lot of tax.
Remember these two tips when giving anything to family members.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CPA, CA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
