Many Tax filers in Canada are always questioning whether gifts such as money to and from family is taxable in Canada. If you have received money from a friend, and or relative what are the tax laws in Canada behind this? This also works the other way if you have given your children a large sum of money is that considered taxable for them? Our article below will cover everything about is a gift of money taxable in Canada?
Is a Gift of Money Taxable in Canada?
The answer to this question up front is no. The Canada Revenue Agency has no "gift tax" in Canada so if you have given or received money from someone there is no tax to be paid on this amount. In addition, there is also no deductible if you are trying to expense what was given to your family and or friend. The question as to whether or not these type of funds are taxable is very confusing as the IRS in the USA does charge on these monies. So conflicting information is easily heard as we share the same media and information with our friends across the border. So the basic answer for money received or given is that it is not taxable. As long as there was no product and or service exchanged between both parties.
What if I gift a property to my family or friend?
If you are giving a property away to a friend and or family that is not your principal residence then it can be subject to capital gains tax. A principal residence is where someone lives in the property full time. This is not to be considered as an investment property. So in this case if you and or someone gifts you their principal residence then it is not subject to tax. However, if you are gifted a residence that was not deemed a principal residence then you will be subject to capital gains tax. The amount would be taxed on Fair Market Value.
So for example: If the purchase price of the property was $500,000 and the Fair Market Value is at $600,000, then you would owe tax on the difference of 50% of $100,000. That calculation would be 50% of $100,000 = $50,000. Then you would pay capital gains tax on the $50,000.
What if I receive a large sum of money overseas?
If you are receiving a large sum of money overseas that was not made by investment and or revenue from a business, this is also considered not to be taxed. However, make sure that you have all the required documentation that shows this is not money earned. Just in case The Canada Revenue Agency ever comes asking about the money brought into the country you will have proof of origin for the money. There is nothng wrong with receiving money as a gift from another country, but it can be subject to review by the government.
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If you have any questions or concerns about any of the topics above, do not hesitate to contact us at Accufile. We are able to be contacted by email at [email protected] and or by chat below on our website. If you or someone you know has a tax situation like our article states, try using our Personal Tax Filing for as low as $25 with our Certified Accountants. We offer great rates on Self Employment Returns at $75, Corporate Returns at $200, and Personal Tax Returns at $25.