Canada does not have a gift tax, which means that in most cases, you don’t have to pay taxes when giving or receiving a gift, even if it’s valuable. However, there are a few exceptions.
The main exceptions are for gifts given to you by an employer, gifts in exchange for a service you provide, or gifted property that has appreciated in value.
Key Takeaways
- In most cases, you don’t have to pay a gift tax in Canada.
- Taxable gifts include employer gifts, gifts in exchange for service, and appreciated property.
- Employer gifts worth more than $500 should be included on your taxes.
- Gifts, taxes, and gratuities in exchange for a service you provided are considered taxable income.
- If you give someone property that’s appreciated in value, you may have to pay capital gains tax.
Is there a gift tax in Canada?
In most cases, neither the gift-giver nor the recipient have to pay taxes on gifts in Canada.
But there are some exceptions, like…
- If your employer gives you a gift worth more than $500
- You gift someone property that’s appreciated in value since you obtained it
- You receive a gift in exchange for services that you perform
Which gifts are taxable in Canada?
Most gifts in Canada aren’t taxable at all, no matter how much they’re worth. However, when you’re filing your taxes, you do need to report gifts from an employer and anything that could be considered earned income.
And if you’re the gift-giver, you may need to pay capital gains tax if you gift certain types of property if they’re worth more when you gift them than when you obtained them.
You don’t need to make a special payment to the CRA for gifts. Taxable gifts are added to your annual income, so when you pay taxes for that year, the tax for those gifts will be included.
Gifts from an employer
According to the CRA, if your employer gives you a gift of cash or items that are worth more than $500, you’ll need to report them as income when you file your taxes with the CRA.
Any gifts that are directly in exchange for job performance are also considered income and should be included on your taxes. Near-cash gifts from your employer, like securities, bonds, jewelry, or gift cards, may also be considered taxable income.
The $500 limit on employer gifts applies annually – and it’s cumulative, so if you receive several moderately-valuable gifts throughout the year that add up to more than $500, you’ll need to pay taxes on anything over that $500.
That said, you don’t necessarily need to keep track of every gift your employer gives you – small items like mugs, trophies, chocolates, or T-shirts don’t count toward the $500 limit. Awards for longstanding service at your company may also be exempt in certain cases.
Tips & gratuities
If you’re given a tip or gratuity as recognition of a service that you provided in the course of your job, the CRA considers that earned income. You should report all tips and gratuities to the CRA when you file your taxes.
Property that’s appreciated in value
If you give someone a gift of property like real estate and stocks, and that property has gained value since you originally bought or received it, you may need to pay a capital gains tax on the difference in value.
The recipient of the gift won’t need to pay any taxes.
What is the capital gains tax on gifted property in Canada?
If you give someone a gift of capital property like real estate, stocks, or other investments, the value of the gift could affect whether you’ll have to pay taxes. If that property is worth more at the time of the gift than it was when you obtained it, you’ll need to pay a capital gains tax on the difference.
This is determined by looking at the fair market value (FMV) of the property compared to the FMV when you bought or received it. If there’s a positive difference – meaning it’s worth more now – that difference is known as a capital gain. And according to the CRA, you’ll owe taxes on that capital gain.
Can I give my children gifts tax-free in Canada?
Because there’s not a gift tax in Canada, your children won’t have to pay taxes on any gifts that you give them, including large amounts of cash, valuable items, or property. And you won’t have to pay taxes on gifts that you give them unless the item falls under capital gains tax rules.
How much money can be gifted tax-free in Canada?
In Canada, there’s no limit on how much money you can gift tax-free. Cash gifts to family and close friends are considered non-taxable, no matter the amount.
A gift might be reported by the bank if the recipient deposits more than $10,000 into their account in a single day, but even if it’s reported, taxes aren’t required.
Do I have to pay taxes on an inheritance in Canada?
The same gift laws in Canada apply to inheritances and gifts. So as long as the gift would otherwise meet the standards for a tax-free gift, you don’t have to pay tax on an inheritance.
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$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.Are gift cards tax deductible in Canada?
If you’re an employer and you give gift cards to your employees, the CRA states that you do not have to pay taxes on them if all of the following conditions are met:
- Funds are pre-loaded on the card
- The card can only be used at one retailer (or group of retailers)
- The card can not be redeemed for cash
- You keep a record of the gift that includes the name of the employee, the date and reason for the gift, the type and amount of the card, and where the card can be redeemed
What if I get something in exchange for a gift?
If you give someone a gift or make a donation, and you then receive a gift in return, the return gift is considered an "advantage" under Canadian tax law. If the fair market value of the advantage is less than 80% of the fair market value of your original gift or donation, it’s still considered a gift, and neither party needs to pay taxes.
Can I claim gifts and donations as deductions on my taxes?
Certain gifts and donations can be included in your tax deductions, according to the CRA. However, these donations must meet certain criteria, such as:
- Qualified recipient: Qualified ones include charities, journalism associations, national arts service organizations, or amateur athletic associations that are registered with the CRA. Some other gifts may be tax deductible, like if you gift certified cultural property to certain institutions.
- Official donation receipt: You must be given a donation receipt by the organization that includes the fair market value of the gift.
- Amount of gift: You can only deduct gifts up to a certain limit – usually 75% of your total annual income.
To determine whether your gift would be considered a valid tax deduction, it’s a good idea to consult a certified tax professional.
FAQ
Do I have to pay taxes on gifts from someone outside of Canada?
You probably won’t have to pay taxes if you live in Canada and someone from outside of the country gives you a gift. However, according to the Canada Border Services Agency, if you’re coming into Canada, you’ll need to report any gifts worth more than $60 CDN – you may need to pay a duty or tax on these.
Do I have to report cash gifts as income to the CRA?
Cash gifts are not considered income by the CRA, so you don’t have to include them as income on your taxes. However, if you deposit more than $10,000 into your bank account in a single day, your bank may be required to report that transaction. Nothing will change about your tax obligation, though.
Do Canadians have to pay taxes on gifts like watches or cars?
No, if you live in Canada, you don’t have to pay taxes if you receive a valuable gift like a watch, car, cash, or real estate.
Is there a limit to how much cash I can receive tax-free in Canada?
No, in Canada, there’s no annual or lifetime limit to how much tax-free cash you can receive, as long as it’s given to you as a gift and not as earned income.
Can I gift someone cash if I owe money to the CRA?
If you owe money to the CRA and you give cash to your spouse, a minor under the age of 18, or someone outside of your close circle of family or friends, then that person could be held liable for your tax debt.
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