Are there property transfer taxes when transferring real estate to a family member as a gift?
In Ontario, a transfer of real property — even a gift within a family — generally triggers land transfer tax based on the value of the consideration. The "consideration" can include the assumption of a mortgage or other debt, even if no cash changes hands. A transfer of property subject to an existing mortgage will attract LTT on the outstanding mortgage balance, not just on any nominal gift amount.
The provincial LTT Act has specific exemptions for certain family transfers, most notably transfers between spouses or common-law partners, which are exempt from provincial LTT under defined conditions. There is no general exemption for transfers to children or other relatives — LTT is payable on those transfers at fair market value or the applicable consideration, whichever is higher.
In addition to LTT, a gift of real estate to a family member triggers a deemed disposition at fair market value under the federal Income Tax Act, meaning the donor may owe capital gains tax. The combination of LTT and capital gains tax consequences means family real estate transfers are complex transactions that require both legal and tax advice before any documents are signed.
Key takeaways
- Land transfer tax is generally payable on property transfers even within families.
- Transfers between spouses may qualify for a provincial LTT exemption.
- Transfers to children or other relatives attract LTT based on the consideration, including assumed mortgages.
- Capital gains deemed disposition rules also apply — both LTT and income tax advice are needed.