The CRA Rule That Punishes Retirees for Signing Their Home to Their Children — Most Have No Idea
Transferring your home to your children before you die triggers a CRA deemed disposition under the Income Tax Act, and the capital gains tax bill is real even if no money changes hands. One Ontario retiree tried to save $9,450 in probate fees and instead owed $40,800 in capital gains tax the same year she signed the paperwork.
This video covers the deemed disposition rules under the Income Tax Act, the principal residence exemption and how it applies to partial title transfers, Ontario probate fees, and capital gains reporting on your T1 return.
When Carol added her daughter to 50% of her $680,000 Barrie home, the CRA deemed it a sale of $340,000 worth of property at fair market value on the day of transfer.
Carol's attempt to save $9,450 in Ontario probate fees by adding her daughter to the home's title instead triggered $40,800 in capital gains tax, a cost ratio of 4.3 to one.
The proposed increase to Canadian capital gains inclusion rates was cancelled on March 21, 2025, meaning the 50% inclusion rate applied to Carol's deemed disposition, resulting in $123,750 of taxable income added to her return.
The principal residence exemption is a personal exemption tied to the individual owner and their ordinary habitation of the property. It does not transfer to a child who does not live in the home. The transferor reports the gain.
Numbers reflect 2026 rates. Verify with CRA or a qualified financial advisor before acting.
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Sources
https://www.canada.ca/en/revenue-agen...
https://www.ontario.ca/page/estate-ad...
This video references information from official Government of Canada sources. All figures verified at time of publication. This is not financial advice. Always consult a qualified financial advisor or tax professional before making financial decisions.
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