Do You Report Inherited TFSA Money on Your Tax Return in Canada?

You have received money from a TFSA after someone died, and you are wondering whether it belongs on your personal return. Many people assume that because a TFSA is tax-free, nothing ever needs to be reported. That is mostly true, but not completely.

What matters is how much you received, how it compares with the account's value on the day of death, and what kind of TFSA it was. This article explains the general rules and the slips you might see in the mail or in your CRA account.

This article covers Canadian federal tax law, which applies in every province.

The short answer: the date-of-death value is generally tax-free

Beneficiaries generally pay no tax on amounts up to the TFSA's fair market value at the date of death, and that amount passes tax-free with no reporting required for it. Fair market value means the highest price, expressed in money, obtainable in an open and unrestricted market between informed, prudent parties dealing at arm's length, neither under compulsion to buy or sell.

The part that can be taxable is growth after death. Earnings made after the date of death and before the estate is settled are taxable, because the tax-free portion is limited to the fair market value at death. So if you received exactly the date-of-death value, there is generally nothing to report on that amount. If you received more, the extra is what to look into.

Successor holder or beneficiary: why the label matters

A successor holder is the surviving spouse or common-law partner named in the TFSA contract or in the will. On the holder's death they immediately become the new holder and take ownership of the account. Where a successor holder takes over, the deceased is not considered to receive an amount from the TFSA on death, so the account continues as a TFSA with its tax-free status intact. There are exceptions. If the deceased had an excess TFSA amount, the successor holder is treated as making a contribution equal to the excess on the first day of the month after death, and any resulting excess in their accounts is taxed at 1% per month while it remains. Quebec also does not recognize the successor holder designation for TFSAs.

Anyone else named, such as a child, another relative or an organization, is a designated beneficiary. They receive the account's value rather than taking over the account. If no successor holder or beneficiary is named, the TFSA assets are directed to the deceased holder's estate and the will governs distribution.

Which slip to expect

The slip depends on the type of account and who is receiving the money. The table below sets out the common situations.

For a deposit or annuity TFSA without a successor holder, the account stops being a TFSA on the holder's death, and all earnings after death are taxable to the beneficiary. For a trust-governed TFSA, the trust keeps limited TFSA treatment during the exempt period, which ends at the earlier of the end of the year following the year of death or when the trust ceases to exist. Issuers report taxable payments to Canadian-resident beneficiaries during that period with no withholding required.

Putting the money into your own TFSA

A survivor who receives TFSA payments as a beneficiary can contribute them to their own TFSA as an exempt contribution that does not affect their own available contribution room. The amount must be received and contributed by December 31 of the year following death, and the total cannot be more than the TFSA's fair market value at death. The survivor sends Form RC240 to the CRA within 30 days of making the contribution, unless the CRA allows a later date.

Starting January 1, 2026, earnings accrued after the holder's death, up to the end of the rollover period, can be designated as exempt contributions. This is a recent change, so confirm the current wording before relying on it.

• No exempt contribution is possible if the deceased's TFSA had an excess TFSA amount, or if payments are received by more than one survivor.
• A non-survivor beneficiary, such as a child, may contribute to their own TFSA only if they have available room, and cannot designate any amount as exempt; over-contributing is taxed at 1% per month while the excess remains.

What to do next

• Ask the TFSA issuer for the fair market value at the date of death and the amount actually paid out.
• Compare the two figures; the difference is the part that may be taxable.
• Keep every slip you receive (T5, T4A, NR4 or T3) and check it against the issuer's statement.
• If you are a surviving spouse or common-law partner, note the December 31 and 30-day deadlines before moving money.
• If the account was with a trust, a charity was named, or the estate is involved, speak with a lawyer or accountant before filing.

Frequently asked questions