How Much Cash Can You Gift Tax Free to Your Spouse or Children in Canada?
There are many different reasons you may want to make a cash gift. If you are considering gifting a significant sum of money, for instance to your spouse or your children, what are the tax implications of making such a cash gift in Canada? This article will help answer your questions.
How Much Cash Can You Gift Tax-Free in Canada?
The good news is that if you wish to gift your spouse or your children a lump sum amount of cash, the cash gift is tax-free.
In Canada, there is no separate “gift tax” on a cash gift. As with inheritances, cash gifts are recognized categories that are excluded from taxation with the rationale that cash gifts do not flow from a productive source of income and therefore should be excluded from taxation.
However, cash gifts to a spouse or a related minor child can in special scenarios have attribution rules with tax implications you may wish to understand—see below.
Special Scenarios with Attribution Rules Involving Tax Implications
There are certain attribution rules for special scenarios that do apply, however. What this means is that certain amounts may be considered to be part of your income for tax purposes and taxed in your hands.
One such scenario is when you gift money to a spouse or a related child, and the money is subsequently invested in the spouse’s or related child’s hands:
- For minor children, any resulting income (including interest and dividends) will normally be attributed back to you with the capital gains considered as capital gains of the minor child.
- For adult children, there are no attribution rules.
- For spouses, any resulting income (including interest and dividends) and capital gains will normally be attributed back to you.
The Bottom Line
If you wish to transfer a significant amount of your wealth to your spouse or your children, there may be more tax efficient methods to do so.
At Bloom Investment Counsel, Inc., we have been protecting, preserving and building family wealth since 1985 and can direct you to a trusted tax professional to help you transfer family wealth in a tax-efficient manner.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.