Do I pay capital gains tax when I sell an inherited home in Ontario?

Generally only on any increase in value after the date of death. Your cost is usually the home's fair market value on the date of death, so the date-of-death value matters a great deal.

Who pays capital gains tax when someone dies?

Canadian tax rules treat the deceased as having sold their property at fair market value just before death, so any gain up to that point is reported on their final return. If the home was their principal residence for every year, the exemption may cover that gain.

Does the principal residence exemption apply to an inherited home?

It can apply to the deceased's gain if the home was their principal residence. For gains after death, it generally only helps if the home becomes your own principal residence, which your accountant should confirm.

Inherited Home Capital Gains: What to Know (Ontario Guide)

Q: Can the date-of-death value be appraised after the home is sold?

Yes. A retrospective appraisal values the home as of the date of death using sales and market conditions from that time.

Short answer: when you sell a home you inherited in Toronto, Hamilton or elsewhere in Ontario, any capital gain is generally measured from its value on the date of death, not from what the deceased originally paid. That makes the date-of-death value one of the most important numbers in the whole estate, for the deceased's final return and for you.

What Happens to Capital Gains When Someone Dies in Canada?

Canada has no inheritance tax, but it does have a deemed disposition at death. The tax rules treat the deceased as if they sold their property at fair market value immediately before they passed away. Any gain between what they paid and that value is reported on their final (terminal) tax return.

There is a common exception: property left to a surviving spouse or common-law partner can generally roll over to them without tax at that point. In that case the gain is deferred until the spouse sells or passes away. Your accountant will confirm whether this applies.

Is the Principal Residence Exemption Available for an Inherited Home?

If the home was the deceased's principal residence for every year they owned it, the principal residence exemption may eliminate the gain on their final return entirely. The executor usually still needs to report the sale or deemed sale and the designation on the return.

If the property was a cottage, a rental or a second home, or was rented out for part of the time, only part of the gain (or none of it) may be covered. That is when CRA most expects a well-supported value. Our guide to the principal residence exemption explains the basics.

What Is My Cost When I Inherit a Home?

The value used for the deemed disposition generally becomes the beneficiary's starting cost, known as the adjusted cost base. If the home was worth $1.2 million on the date of death, that is usually your cost, even if your parents bought it decades ago for a fraction of that.

This is why an accurate number protects both sides. Too high a value can increase tax on the final return if no exemption applies; too low a value can leave you with a larger gain when you sell.

Do I Pay Capital Gains Tax When I Sell the Inherited Home?

Generally, you or the estate are taxed only on the increase in value after the date of death, less selling costs such as commissions and legal fees. If the home is sold by the estate fairly soon after death, the gain is often small. If it is kept for several years, rented out or sold in a rising market, the gain can be significant.

The principal residence exemption usually helps with that later gain only if the home becomes your own principal residence. Whether the estate or the beneficiaries report the sale depends on how it is handled, so speak with your accountant before listing.

Why an Accurate Date-of-Death Value Matters

The same date-of-death value is typically used in three places: the deceased's final return, Ontario's Estate Administration Tax (see how a home is valued for Ontario probate), and the beneficiaries' cost. A signed estate appraisal gives one consistent, documented number for all three.

A certified report is prepared to the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP), explains the comparable sales used and is much easier to support if CRA asks questions. An agent's opinion or an online estimate does not carry the same weight.

What if the home has already been sold?

That is fine. A retrospective appraisal values the home as of the date of death using sales and market conditions from that time. Photos, listing details and records of any work done all help.

How Much Does a Date-of-Death Appraisal Cost?

Because it looks back to a past date, it is priced as a retrospective appraisal. At Best Home Value, fees start at $470 for a condo or townhouse, $575 for a detached or semi-detached house and $800 for a 2-4 unit property in the Greater Toronto and Hamilton Area. Your exact fee is confirmed in writing within one business day, before anything is booked. See our full fee table.

A signed PDF is typically delivered 2–3 business days after the inspection.

This article is general information, not tax, legal or financial advice. Please speak with your accountant, lawyer or lender about your situation.

Selling an Inherited Home in Ontario: Do You Pay Capital Gains?