Do you pay tax when you inherit a house in Canada?

There is no inheritance tax in Canada. Instead, the deceased is treated as having sold their property at fair market value on the date of death. Any tax on that deemed disposition is the estate’s, and the principal-residence exemption may reduce or eliminate it.

What is my cost base on an inherited home?

Generally the fair market value of the home on the date of death. When you later sell, your capital gain is the difference between the sale price and that date-of-death value — not the price the deceased originally paid.

Is the gain taxable if I sell later?

If the home was not your own principal residence while you held it, the increase in value between the date of death and the date of sale is generally a taxable capital gain. A portion of that gain is included in income at the applicable inclusion rate; confirm the current rate with an accountant, as it has been the subject of recent federal proposals.

Executor Services · Tax

Capital gains on inherited property in Ontario

Reviewed by Angelos Spingos, Principal Lawyer, Spingos Law · Licensed by the Law Society of Ontario · Last reviewed July 7, 2026

“Will I be taxed on the house I inherited?” is one of the most common — and most misunderstood — questions in an estate. Here is how it actually works in Canada.

No inheritance tax — a deemed disposition instead

Canada does not have an inheritance or estate tax. What it has is a deemed disposition: under the Income Tax Act, the deceased is treated as having sold everything they owned at fair market value on the date of death. Any resulting capital gain is reported on the deceased’s final return, and the tax is the estate’s responsibility — not something a beneficiary pays simply for inheriting.

The principal-residence exemption

If the home was the deceased’s principal residence for all the years they owned it, the principal-residence exemption generally shelters the gain up to the date of death. That is why many inherited homes carry little or no tax at the moment of inheritance.

Your cost base — and the gain when you sell

Here is the key point for beneficiaries: your cost base is the date-of-death value. If you hold the property and sell later, your capital gain is measured from that value — not from what the deceased paid decades ago. If the home was not your own principal residence in the meantime, the increase between the date of death and the date of sale is generally a taxable capital gain.

Rate note. A portion of a capital gain is included in taxable income at the inclusion rate in effect for the year. That rate has been the subject of recent federal proposals and changes, so confirm the current figure with an accountant before you rely on it. This page does not quote a fixed rate for that reason.

Timing and the estate

An estate can qualify as a graduated rate estate for up to 36 months, which can affect how income and gains are taxed during administration. Because the tax turns on values at the date of death and again at sale, getting a proper date-of-death valuation of the home is one of the most useful early steps — it protects the estate and sets your cost base. See also selling an inherited house and probate in Ontario.

Common questions

Do you pay tax when you inherit a house in Canada?: There is no inheritance tax in Canada. Instead, the deceased is treated as having sold their property at fair market value on the date of death. Any tax on that deemed disposition is the estate’s, and the principal-residence exemption may reduce or eliminate it.
What is my cost base on an inherited home?: Generally the fair market value of the home on the date of death. When you later sell, your capital gain is the difference between the sale price and that date-of-death value — not the price the deceased originally paid.
Is the gain taxable if I sell later?: If the home was not your own principal residence while you held it, the increase in value between the date of death and the date of sale is generally a taxable capital gain. A portion of that gain is included in income at the applicable inclusion rate; confirm the current rate with an accountant, as it has been the subject of recent federal proposals.

General information for Ontario, not legal or tax advice; confirm current tax rules with a lawyer and accountant. Reviewed by Angelos Spingos, Spingos Law. Last reviewed July 7, 2026.