Is There a Gift Tax in Canada?

Are gifts taxable in Canada?

Contrary to popular belief, you don't pay tax on a personal cash gift in Canada, neither as the giver nor the receiver.

Many Canadians get this misconception from the U.S., where tax on cash gifts can apply to the giver. But here, north of the border, if you give or get a generous cash boost—from family, a partner, or an inheritance—the CRA isn't waiting to pounce.

“If you receive a gift or an early inheritance of $5,000, $50,000, or even $500,000, you can accept it and not worry that the taxman will show up at your door,” says Natalija Andronikova, a senior tax expert at TurboTax Canada.

You can also give away money or assets freely without the recipient being taxed—with a few exceptions. There are a few situations worth knowing about, especially when property, investments, or business assets come into play. Let's unpack how the Canada Revenue Agency (CRA) views gifts, and what situations may trigger taxes.

Whats the difference between gifts and income?

The CRA views gifts and income differently. Spoiler alert: it's all about how you get the money.

What counts as a gift?

A gift is something given freely, with no strings attached—no payment, no obligation, no service in return. The CRA doesn't consider most personal gifts, like cash from family or friends, to be taxable income that you'd report on your tax return.

Income, on the other hand, is money you earn from work, sales, or investments—and the CRA taxes all of it, no matter where it's earned. That includes:

• Employment and self-employment income: Salaries, freelance/side gig earnings, commissions, tips, and certain benefits.
• Pension and savings plans: OAS, CPP/QPP benefits, RRSP withdrawals, RRIFs, annuities, and foreign pensions.
• Investment income: Interest, dividends, taxable capital gains earned outside of a registered account like an RRSP or a TFSA.
• Benefits: EI, workers' compensation, social assistance.

“Think of income as something you've earned and gifts as something freely given,” explains Andronikova. “If your aunt slips you cash for your birthday, that's a gift, not income. But if you invest that money and earn interest, that interest is generally taxable.”

Cash gifts to family members

Helping out family with money is common, such as parents helping with a down payment, grandparents chipping in on tuition, or siblings lending a hand. In most cases, these are considered personal gifts and are tax-free.

How much money can I receive as a gift tax-free in Canada?

You don't have to report a one-time personal cash gift as income or pay tax on it. The exception, says Andronikova, is a regular gift (received monthly, for example), which will generally be viewed as income.

The only catch: if a cash gift earns income—say, through interest or investments—you need to report those earnings on your return.

How much money can I give as a gift tax-free in Canada?

Here's where it can get a bit trickier. If you give straight-up cash, you're in the clear. Simple as that. Because cash doesn't grow in value, there's no profit or gain to declare.

But if you sell investments or property to come up with the funds to give to family or friends, that sale could trigger a capital gain, which is taxable in your hands.

Likewise, if you give stocks, real estate, or other investments directly to an individual, the CRA treats it as though you sold the asset at market value (a “deemed disposition”). If it's gone up in value since you bought it, you could have a taxable gain to report.

Also, watch out for attribution rules—the CRA's way to prevent tax avoidance through income splitting. If you give money to your spouse, partner, or a child under 18, and that money earns income (like interest or dividends), the CRA may attribute that income back to you, meaning you may be taxed on the gains.

“Big gifts can be meaningful, even life-changing, but can also have tax strings attached,” says Andronikova. “Before you start writing cheques, talk to a financial advisor or tax professional about the optimal strategy for funding a large gift.”

Does Canada have an inheritance tax?

No, there's no inheritance tax in Canada. If you inherit money or property, you don't have to report it as income or pay tax on it. The taxes happen before the inheritance gets to you.

“There's no inheritance tax, but that doesn't mean the CRA isn't involved,” says Andronikova. “The key thing to know is that the estate settles any taxes first, so by the time you receive an inheritance, it's already been taken care of.”

Here's what actually happens: When someone passes away, the CRA treats most non-registered assets as if they were sold at market value right before death (a “deemed disposition”). Half of any capital gains are taxed in the deceased's final return. The estate pays those taxes and income taxes first, and whatever's left goes to the beneficiaries.

If the estate passes to a spouse or common-law partner, many of those taxes can be deferred until later, so the assets can generally transfer tax-free for now. (Learn more about inheritance tax laws.)

What many Canadians mistake for an “inheritance tax” is actually probate, the legal process confirming a will's validity and giving the executor authority to distribute the estate.

To complete this process, most provinces and territories charge probate fees, also called estate administration fees or probate taxes. For example, in Ontario, they're known as the Estate Administration Tax. The amount varies, with some provinces or territories charging a percentage of the estate's value, while others use a flat fee.

“Probate gets a bad rap, but it's really just the legal green light that lets the executor do their job,” says Andronikova. “The fees aren't an extra tax. They're more like an administrative cost that depends on where you live and how much the estate is worth.”

Good estate planning, including preparing a will and organizing your assets ahead of time, can help cut down on probate costs and make things easier for your loved ones when the time comes.

READ MORE:Named in the Will? What to Know About Canadian Inheritance Tax Laws

Are gifts from employers taxable?

Yes, employer gifts—such as gift cards, prepaid Visa cards, or cheques—are taxable benefits, because they have a clear dollar value and can be spent almost anywhere. That means their value is added to your income and reported on your T4, just like regular pay. So, if your boss gives you a $100 prepaid Visa card, the CRA considers that $100 in income.

“If you can spend it like cash, the CRA will probably treat it like cash,” says Andronikova.

There are a few exceptions. Non-cash or near-cash gifts, like physical items (except for very small items, like T-shirts, mugs, and plaques) or certain gift cards, may not be taxable if they meet the CRA's rules. To be tax-free, the gift must:

• be for a special occasion (like a birthday, holiday, or work anniversary); and
• have a total annual value of $500 or less (including taxes).

If the total goes over $500, the extra amount is taxable. Cash or near-cash gifts are generally taxable, no matter the amount.

To qualify as non-cash, the item or gift card must have limited use (for example, it's usable at just one store or supplier) and can't be exchanged for cash.

Crib notes: A $50 holiday wine and cheese basket? Probably fine. A $200 Visa gift card? The taxman wants to know. Learn more about employer gifts and awards.

Are work bonuses taxable?

Yes, work bonuses are always taxable income in Canada. It might feel like a gift when that big fat cheque lands, but the CRA sees it as income wearing a Santa hat.

Bonuses are taxed like regular pay, subject to income tax, CPP, and EI deductions, and are reported on your T4 for the year you receive them, not the year they're rewarding you for. When you file your taxes, the bonus is included with your employment income on your tax return.

How much tax you pay depends on your marginal tax rate (the rate that applies to your last dollar of income). A big enough bonus could bump you into a higher bracket, meaning that extra income gets taxed at a higher rate.

“A bonus is always good news,” adds Andronikova. “Just remember: if it shows up on payday, it's probably showing up on your tax return, too.”

Learn more about how bonuses are taxed in Canada.

Making sense of gifts (and taxes) doesnt have to be complicated

Whether it's birthday money, a year-end bonus, or a hefty inheritance, TurboTax Online makes it easier to tell what's taxable and what's not—no guesswork, no stress. The software automatically sorts out what counts as income and what doesn't, so you can file with confidence (and maybe keep a little more in your pocket).

Still not sure if your bonus or cash gift is taxable? TurboTax's experts can help you figure it out—and make sure you're not giving the CRA more than its fair share.

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