Estate Tax Calculator Ontario: How to Estimate What Your Estate Owes

Families often ask for a single number: what will the estate owe? No online calculator can give a reliable figure without the details, but you can build a rough estimate by adding up a few separate pieces.

This article walks through those pieces and finishes with a worked Ontario example. It is a rough guide only. An accountant or lawyer should confirm the real figures before anything is paid or distributed.

The pieces that make up the total

The total is not one tax. It is usually several amounts calculated under different rules, which you add together.

Final return income, gains and RRSPs

On death, a person is considered to have sold all their property just before death. Capital property is treated as disposed of at fair market value, and the gain or loss is proceeds minus adjusted cost base. The result goes on Schedule 3 of the final return, with the taxable amount on line 12700.

Property passing to a resident surviving spouse or common-law partner may be rolled over with no gain or loss on the final return, if it vests indefeasibly in the spouse or partner within 36 months of death. A principal residence designation applies only until the date of death, and even a fully exempt gain must be reported on Schedule 3 and designated on Form T1255.

For an unmatured RRSP, the deceased is considered to have received the plan's fair market value immediately before death, and it is included in income on the final return. If a refund of premiums goes to a qualifying survivor, such as a spouse, common-law partner or financially dependent child or grandchild, it can reduce the amount taxed on the final return and be taxed to the survivor instead.

Funeral expenses, probate fees and fees to administer the estate cannot be deducted as personal expenses on the deceased's returns.

Ontario Estate Administration Tax

For estate certificates applied for on or after January 1, 2020, there is no tax if the estate is $50,000 or less. Above that, the tax is $15 per $1,000 (or part) of the value over $50,000, so a $240,000 estate owes $2,850.

The estate value includes Ontario real estate less mortgages and liens, bank accounts, investments, and RRSPs, RRIFs and TFSAs with no beneficiary designation. It excludes jointly owned assets that pass automatically to the surviving owner and assets with a named beneficiary. Funeral costs, lawyer fees, loans and credit card debts cannot be deducted, though mortgages on real property can.

An Estate Information Return is due within 180 calendar days after the certificate is issued, even if no tax is payable.

A worked example

Suppose an Ontario resident, single, dies with the following. The situation is invented for illustration, and no dollar amounts are used for the income tax side because the rates depend on the year.

• Employment and pension income up to the date of death.
• An unmatured RRSP with a child named as beneficiary.
• Non-registered investments that are worth more than their adjusted cost base.
• A home with a mortgage, and bank accounts, with no joint owners.

Final return pieces: the income up to the date of death is reported. The RRSP's fair market value is included in income. The investments are treated as sold at death, giving a gain of proceeds minus adjusted cost base. The taxable amount of that gain goes on line 12700. The home would still be reported and designated if its gain were exempt. Add these up, then apply federal and Ontario rates from the T1 package and Form 428.

Probate tax piece: the estate for this purpose is the home less the mortgage, plus the bank accounts and investments. The RRSP is excluded because it has a named beneficiary. The first $50,000 of that value is not taxed, and the rest is taxed at $15 per $1,000 or part. For comparison, a $240,000 estate owes $2,850.

Note the RRSP: it avoids probate tax because of the beneficiary designation, but it is still taxed on the final return.

What to do next

Estates that earn income after death may also need a T3 trust return, due no later than 90 days after the trust's tax year-end. Before distributing property, the legal representative must obtain a clearance certificate, or they can be personally liable for unpaid amounts up to the value distributed. Request it only after returns are filed and assessed and taxes are paid or secured.

• List every asset and note who is named as beneficiary or joint owner.
• Get fair market values at the date of death and the original cost of investments.
• List RRSPs and RRIFs and whether a survivor can receive them.
• Estimate the Ontario Estate Administration Tax from the value of the estate.
• Ask an accountant to prepare the final return and any optional returns.
• Do not distribute property until the clearance certificate is in hand.

Frequently asked questions