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Transferring Real Estate to Family in Ontario:
The Taxes People Miss

Thinking of adding a child to title, “gifting” the cottage, or shifting part of a rental to family? It can be done, but it is rarely simple. Two systems usually matter most: Ontario’s Land Transfer Tax (LTT) and the federal capital gains rules.

1) When Land Transfer Tax applies

Ontario LTT is triggered when someone acquires an interest in land. The tax is calculated on the value of consideration. Consideration can be cash, but it also includes assumed debt, such as taking over part of a mortgage. If no consideration of any kind passes, the LTT base can be nil. If any value changes hands, expect LTT.

Spouse-to-spouse transfers

Ontario provides limited spousal exemptions. Some transfers for natural love and affection can be exempt. In certain spouse-to-spouse cases, assuming an encumbrance on title can also be exempt. The details are technical, so confirm the facts with counsel.

Parent-to-child transfers

There is no automatic parent-child LTT exemption. If a child assumes even part of a mortgage, that assumption is consideration and LTT can apply.

Unregistered “beneficial” changes

Changing beneficial ownership without registering a deed can still be taxable for LTT. The province requires a return and payment on unregistered dispositions of a beneficial interest.

2) Capital gains on gifts and family transfers

For income tax, Canada’s rules generally treat a gift to a non-arm’s-length person as a deemed sale at fair market value (FMV) on the transfer date. If the property is not your principal residence, the gain since you acquired it may be taxable, even if your child pays nothing.

The principal residence exemption can eliminate or reduce a gain on a qualifying home, subject to the usual designation rules.

3) Partial transfers and joint ownership risks

Adding a child as a joint owner, transferring only a slice of title, or making “estate-planning” changes can trigger unintended consequences: capital gains on the transferred portion, family-law or creditor exposure, and estate or probate disputes. Changing beneficial ownership can be taxable even when legal title looks unchanged.

4) Worked example: Ontario LTT on an assumed mortgage

Scenario: A parent transfers 50% of a property to an adult child. The child agrees to assume $200,000 of the mortgage as their share.
What is taxed: In Ontario, LTT applies to the value of consideration. Here, that is the $200,000 assumed debt.

Provincial LTT rates (single-family residential):

  • 0.5% on the first $55,000
  • 1.0% on the amount from $55,000.01 to $250,000
  • 1.5% from $250,000.01 to $400,000
  • 2.0% above $400,000
  • 2.5% above $2,000,000

Step-by-step on $200,000 consideration:

  • 0.5% × $55,000 = $275
  • 1.0% × ($200,000 − $55,000 = $145,000) = $1,450
    Total Ontario LTT: $1,725

If the property is in Toronto, the municipal LTT is charged in addition to the provincial LTT, using Toronto’s own brackets. For high-value homes, Toronto has extra higher MLTT tiers.

5) A pre-transfer checklist

  • Clarify whether beneficial ownership is changing, and whether the change will be registered.
  • List all forms of consideration, including any mortgage assumption.
  • If the property is not a principal residence, estimate capital gains under the deemed FMV rules.
  • Weigh estate, probate, family-law, and creditor implications of joint ownership.
  • Document a reasonable FMV and your adjusted cost base for your records.

Bottom line

  • LTT: Any consideration, including assumed mortgage debt, can trigger LTT.
  • Capital gains: Gifting non-principal-residence property is usually a deemed sale at FMV, which can create a capital gains bill even when no money is paid.
  • Plan first: Talk to a real estate lawyer and an accountant before transferring any share of a property. A well-intended gift can become an expensive mistake if structured poorly.

Sources (for reference)

  • Ontario Ministry of Finance — Land Transfer Tax (LTT) overview and guidance on beneficial dispositions, spousal transfers, and value of consideration
  • City of Toronto — Municipal Land Transfer Tax (MLTT) rates and brackets
  • Income Tax Act (Canada), s. 69 — deemed disposition at fair market value for non-arm’s-length transfers
  • CRA — Income Tax Folio S1-F3-C2 (Principal Residence)

Need a plan that fits your family?

Talk to a real-estate lawyer and an accountant before transferring any share of a property. A well-intentioned gift can become costly if structured poorly.

Next steps and helpful resources:

Have a scenario you want reviewed?
Call Craig & Coleen at 905-308-1877 or reply with the property type, location, estimated FMV, adjusted cost base, ownership split, and mortgage details. We’ll outline the tax touchpoints you can discuss with your lawyer and accountant.

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