can we receive a monetary gift from my father to use for a down payment without being taxed?

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Emma (anonymous) Posted 3 days ago MadanCA Team edited answer 2 days ago

Hi Allan, My husband is a US Citizen (with PR) and I am dual. We are moving to Canada from the US in 2026. My father (Canadian) has offered to loan or gift us (whichever is easier re: tax or other issues) money for a downpayment on a house in Canada. He was told that we would be taxed on this money because we are US Citizens and will be filing US taxes (as well as Canadian) yearly. Are these tax implications true? Is it better that he loan us the money with a formal loan note? Thank you!

1 Answer

score 0 · Answer 1 · 2025-12-09T22:19:20+00:00

Hi Emma,

Thank you for your question — this is a very common concern for cross-border families, and I’m happy to clarify.

1. Canada – No Gift Tax

Canada does not impose a gift tax.
If your Canadian father gives you money for a down payment, neither you nor your husband will pay Canadian tax, regardless of the amount.

2. United States – Gifts From a Non-U.S. Person Are Not Taxable

As U.S. taxpayers, you and your husband will continue filing U.S. tax returns even after moving to Canada, but:

Gifts received are not taxable income in the U.S.
When the donor is a foreign individual (like your Canadian father), no U.S. gift tax applies.

3. U.S. Reporting Rules – Form 3520

While there is no tax, the IRS may require an informational filing depending on the type and amount of the gift.

a) Gifts from a Foreign Individual or Foreign Estate

If total gifts exceed USD $100,000 in a calendar year, you must file Form 3520.
This applies directly to your situation.

b) Gifts from a Foreign Corporation or Foreign Partnership

These have a much lower threshold, currently around USD $18,000 (indexed each year).
This rule does not apply here unless the money comes from a company rather than your father.

Important:

Form 3520 is reporting only. It does not trigger tax, but penalties can apply if it’s required and not filed.

4. Should It Be a Gift or a Loan?

In most cases, a gift is simpler and avoids the need for a formal promissory note.

A loan may be preferable if:

Your father wants repayment,
You want documented terms for family-law or estate-planning reasons, or
You want to avoid Form 3520 reporting by spreading gifts over multiple years.

If a loan is used, it should include:

A written promissory note,
Repayment terms,
A reasonable structure (interest-free is allowed from foreign persons).

5. Summary

No tax in Canada or the U.S. on gifts from your Canadian father.
Possible Form 3520 filing if the total gift exceeds USD $100,000 in one year.
Loan option is available but usually not necessary unless preferred for legal or family reasons.

If you’d like more personalized guidance as you prepare for your move to Canada in 2026, feel free to reach out.

can we receive a monetary gift from my father to use for a down payment without being taxed?

1 Answer

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