In Ontario, giving the gift of real estate, irrespective of it being a family cottage, your current home, or an investment property, is absolutely legal. It’s something many parents, spouses, and even close friends consider doing for personal, financial, or estate planning reasons.
But while the idea might sound as simple as handing over the keys or updating a name on a deed, the reality is more complex. A property gift is still a legal transfer of ownership, with real consequences involving taxes, legal filings, and long-term financial impact.
If you’re thinking about gifting property in Ontario, here’s what you need to know before moving forward so your gift doesn’t come with unexpected costs or legal complications.
What It Really Means to “Gift” Property
At its core, gifting property means transferring ownership without receiving full market value, or any money, in return. You might sell it for a token amount (such as $1), or not at all. As far as the law is concerned, what matters is intent: if the transfer is done voluntarily, without the expectation of payment or future repayment, it’s considered a gift.
Even so, gifting property isn’t informal or optional when it comes to legal steps. You’ll still need a properly executed Deed of Transfer, land transfer tax documents, and official registration with Ontario’s Land Registry. In fact, the legal process is almost identical to that of a traditional sale, which is why involving a real estate lawyer is essential, even if no money is changing hands.
The Tax Trap Most People Miss: Capital Gains
Many people are surprised to learn that gifting a property can trigger significant tax consequences, especially when it comes to capital gains.
Here’s why: under Canadian tax law, if the property you’re giving away isn’t your principal residence, the Canada Revenue Agency (CRA) treats the gift as if you sold the property at its fair market value—even if no money was exchanged.
So, if you originally bought a rental property for $300,000 and it’s now worth $600,000, gifting it to your child would result in a $300,000 capital gain. Half of that gain, i.e., $150,000, would be taxable in the year of transfer. That tax bill falls on the person giving the gift, not the recipient.
What About Your Home?
If the property is your principal residence, the Principal Residence Exemption (PRE) may protect you from paying capital gains tax. However, that exemption only applies under certain conditions, especially if you own more than one property. It’s wise to speak with a tax professional before assuming you’re in the clear.
Spousal Transfers: A Special Case
If you’re transferring property to a legal spouse, the tax rules are a little more forgiving, thanks to the spousal rollover provision under the Income Tax Act.
This rule allows you to transfer property to your spouse at its original cost, not the current market value. As a result, there’s no immediate capital gains tax. Instead, the tax is deferred until your spouse eventually sells or transfers the property to someone else.
That said, this tax deferral isn’t automatic. The property transfer must be documented properly, and the deed must be registered with precise legal language. If you’re working with a common-law spouse, make sure you meet the CRA’s criteria (generally, living together for 12 continuous months or sharing a child) to qualify for the rollover.
Do You Have to Pay Land Transfer Tax on a Gift?
In Ontario, Land Transfer Tax (LTT) usually applies when a property changes hands. But there are exceptions, especially for spouses.
You may be exempt from LTT if:
- The transfer is between legal spouses
- No money is exchanged
- There’s no mortgage on the property
However, if a mortgage is involved, or the gift is to a non-spouse, like a child, sibling, or friend, LTT may still apply. In these cases, the tax is often calculated based on the outstanding mortgage value, not the $0 sale price. A real estate lawyer can help determine if your situation qualifies for a full or partial exemption.
Why a Lawyer Is Essential—Even When It’s a Gift
It’s easy to think, “We’re just giving it to family, why do we need a lawyer?” But property transfers are legal transactions that require:
- Title searches to check for debts, liens, or encumbrances
- Drafting of the Deed of Transfer with correct legal language
- Filing of land transfer affidavits and tax documents
- Electronic registration with Ontario’s land registry
- Tax coordination, especially for capital gains or rollover eligibility
If you intend to retain a life interest in the home, such as continuing to live there after gifting it, a lawyer can draft specific clauses to protect your rights and avoid confusion or future disputes.
Common Mistakes That Could Cost You
Gifting property may feel informal, but these common errors can have serious consequences:
- Failing to involve a lawyer in the transfer
- Forgetting to file with the CRA
- Underestimating the capital gains tax on second properties
- Assuming spousal exemptions apply automatically
- Overlooking land transfer tax obligations
These issues can lead to delays, audits, penalties, or disputes, sometimes years after the transfer took place.
Give the Gift Without the Headache
Yes, you can still gift real estate in Ontario, but you need to do it right. Whether you’re helping a child buy their first home, planning your estate, or simplifying shared ownership with your spouse, gifting property is a generous move that carries serious legal and financial weight.
By working with a real estate lawyer, you can ensure:
- The property is transferred legally
- Your taxes are minimized
- Your rights are protected
- The process is smooth for both the giver and the recipient
At Philer.ai, we specialize in handling property gift transfers with precision and care. We’ll coordinate with your accountant, prepare your legal documents, and guide you through the process from start to finish.
📅 Ready to gift property the smart way?
Visit Philer.ai to book your consultation and protect your generosity with expert legal guidance.
