How Do You Report Income Earned After Death on a T3 Estate Return in Ontario?

Income that arrives after the date of death is generally reported on a T3 Trust Income Tax and Information Return for the estate, but some amounts, such as TFSA earnings, are reported by beneficiaries instead. The exception is income that had already accrued: periodic amounts such as interest, rent or annuity payments are deemed to accrue in equal daily amounts, and the part up to the date of death goes on the final return.

Who pays depends on what happens to the income. Amounts the estate allocates to beneficiaries are deducted from the trust's income and generally included in the beneficiaries' income, reported on T3 slips, while income the estate keeps is taxed in the estate. A graduated rate estate is taxed at graduated rates, while an estate that no longer qualifies generally pays the flat top federal rate.

The T3 and any balance owing are due no later than 90 days after the estate's tax year-end, and a graduated rate estate can choose a year-end up to one year after the date of death. A return may not be needed if the estate was distributed right after the death and earned no income before then. An accountant or lawyer can help confirm what applies.