Dealing with the loss of a parent is never easy — while it happens to all of us, it is still a life-altering event in people’s lives.
Many also find they are tasked with dealing with estates and properties following the death of a parent. In some cases, it is straightforward and in others it is very (very) complicated. Either way, when paired with grief, it is never easy.
If you find yourself in the position of inheriting a property following the death of a parent and you have decided to sell it, there are a few things you will need to know and keep in mind.
This is not a comprehensive “How To”, rather some answers to some commonly asked questions about selling a house you have inherited after the death of a parent.
6 Common Question You Need to Know
1. Do I Need to Pay Taxes On the House?
That depends on whether or not you sell the house. Generally speaking, in Canada, there is not an inheritance tax. Most inherited homes are nontaxable if you are taking over ownership of the house.
2. But What If I Want to Sell?
Well, that’s different. In Canada, if you decide to sell, you will need to pay capital gains tax on the sale of the inherited property.
3. What is the Capital Gains Tax?
The capital gain is considered the profit you make on the sale of an item. The capital gains tax is the tax applied to that profit number.
4. Why Do I Have to Pay a Capital Gains Tax On a Property I Inherited After My Parent’s Death?
There are a couple of things to consider here. First, when you sell a primary residence, capital gains are not taxable.
However, when you are selling an inherited property, you will need to pay taxes on 50% of the capital gains. And on secondary residences and commercial properties, capital gains are taxable. That is simply the way the law is written in the Canadian tax code.
5. How Do I Calculate What the Capital Gains Tax is?
Traditionally, the total capital gains are calculated by taking the current fair market value and subtracting the value at the time of purchase. If you decide to sell a primary residence that you inherited, you will have to pay 50% of the capital gains tax.
6. So What Should I Do First When I Gain a Property After a Parent’s Death?
The first thing to do is get organized. Look through records to see if you can find the original purchase value. Then get an appraisal — the value when you take possession will be needed if or when you decide to sell or if you pass the property to someone else.
Every situation is different — some people are eager to sell quickly and some need to take their time. If you can consult a lawyer, they will be able to go in-depth about what your options are.
If you have any questions about what the next steps should be if you have inherited a home or property after the loss of a parent, contact me.