Transfer of Deed Between Spouses in Ontario: Tax and Process

Adding a spouse to the title of your home, or taking one off, looks simple: you sign a new deed and register it. In practice three separate areas of law are involved: land transfer tax, family law and income tax.

This article explains how those pieces fit together in Ontario. It describes how things generally work. Your facts, such as a mortgage or a separation, can change the result, so confirm the details with a lawyer or accountant.

How a deed transfer is registered

In Ontario, land documents are registered electronically through Teraview by authorized account holders. The land registry is online only and holds the official records of property ownership. In practice, a lawyer usually prepares and registers the transfer for you.

ServiceOntario reviews and certifies registrations, but it cannot search records, give legal advice or explain a property's records. Anyone can search and download current and historical property records, such as a parcel register, through OnLand for a fee. Pulling the parcel register first is a sensible way to confirm who is on title today.

Land transfer tax between spouses

Land transfer tax is normally calculated on the value of the consideration, meaning the amount paid for the land, including liabilities the new owner assumes, such as a mortgage. The Act defines the value of the consideration broadly, to include any benefit of whatever kind conferred as part of the arrangement.

The Land Transfer Tax Act has no general exemption for gifts of land. If no consideration of any kind passes, though, no tax is payable because the tax is calculated on a nil value.

For spouses, Regulation 696, R.R.O. 1990 adds specific relief. A transfer between spouses or former spouses is exempt where the only consideration is assuming a registered mortgage, or where it is made under a written separation agreement or a court order. The definition of spouse comes from section 29 of the Family Law Act. It includes married spouses and unmarried couples who cohabited continuously for at least three years, or who are in a relationship of some permanence and are parents of a child.

If money or other value changes hands beyond that, the exemption may not apply. Understating the price is an offence under the Act, and the fine can be substantial, with possible imprisonment. Report the arrangement accurately.

Matrimonial home rights

Both spouses have an equal right to possession of a matrimonial home, whoever is on title. A matrimonial home is property a spouse has an interest in that the spouses ordinarily occupy as their family residence.

No spouse may sell or mortgage an interest in a matrimonial home unless the other spouse joins in or consents, has released their rights in a separation agreement, or a court order authorizes it. A transaction that breaks this rule may be set aside. Consent is not needed for a property that has not been designated as a matrimonial home, where a joint designation of another property is registered and not cancelled.

These rules apply to married couples as defined in the Family Law Act. Common-law partners are generally not covered by the matrimonial home rules, though a partner who contributed to a property may have a claim.

Income tax on the transfer

Under the federal Income Tax Act, a person who gifts property, or transfers it to a non-arm's-length person for less than fair market value, is deemed to have received proceeds equal to fair market value. That can create a capital gain.

Spouses have a rollover. Capital property transferred to a spouse or common-law partner, where both are resident in Canada, is generally deemed transferred at cost, so no gain arises immediately. The transferor can elect out on their return.

If you later sell a home that was your principal residence, you must report the sale and designate the property on Schedule 3 to claim the principal residence exemption. An accountant can explain how this applies to your situation.

What to do next

• Get a current parcel register so you know exactly who is on title.
• List any mortgage on the property and ask the lender whether it must approve a change in ownership.
• Confirm whether the home is a matrimonial home and whether both spouses consent in writing.
• Ask a lawyer whether the spousal land transfer tax exemption applies to your arrangement.
• Ask an accountant about capital gains and the principal residence designation.
• Have a lawyer prepare and register the transfer.

Frequently asked questions