Death and Taxes in Canada

Death and taxes – two things that we all have to deal with at some point, no matter how unpleasant they might be. Sometimes, however, we have to deal with death and taxes at the same time. It’s at times like these that you’ll be glad to have the help and advice of experts like Kevin Martin Accounting, who can provide professional accounting services and make sure everything gets neatly squared away.

When a person passes away, their tax obligations sadly don’t all pass away with them. Unfortunately, the surviving spouse or heir needs to deal with whatever tax obligations remain – to close out the account, so to speak.

However, with the right accountant, you could avoid the worst of these. Let’s take a look at how you can minimize the tax obligation upon death.

Estate Tax and Inheritance Tax

These taxes can be pretty arduous in the US ‒ especially if a large estate is left behind. In the US, estate tax can go as high as 40% after death.

In Canada, the good news is that there are generally no estate or inheritance taxes payable upon death.

The only taxes payable by the estate are those owed by the deceased person before their death. Once those are settled out of the estate, the tax obligation is complete.

Whatever the case, having a good insurance policy will ensure that any outstanding taxes get paid upon dying without putting that burden on the family.

Exceptions to the Rule

If a property was transferred to an heir, be it a child or surviving spouse, but that property is the primary residence, no estate or inheritance tax is due. However, if the property had appreciated, then some capital gains tax might be payable.

If a property is inherited from a deceased person that is not the primary residence, then capital gains tax on the full value of the house might be owed. 

However, if the house was gifted to an heir before the deceased died and was declared as the heir’s primary residence in the will, then tax can be avoided.

Capital gains can be avoided another way by making use of the Lifetime Capital Gains Exemption, which currently stands at around $900,000 per citizen. However, since this is a lifetime exemption, it can only be used once. If the deceased has used this exemption or dipped into it in years prior, then the full amount might not be available anymore. 

At Kevin Martin Accounting, our professional accounting services will ensure that the trauma of doing your taxes and dealing with the death of a loved one will not overwhelm you. Contact us now for expert advice!

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