In Canada, how much money can you gift a friend or family member without them being taxed for it?

In the modern world, it is becoming more and more typical for parents or families to give money to their relatives to assist them in purchasing homes, typically in the form of down payment assistance. Given that down payments have risen so significantly over the past few decades, homeownership is effectively out of reach for the majority of young people in the country without some sort of assistance. Furthermore, giving your child a large sum of money and telling them to go acquire a mortgage is not the easiest solution, either. Before presenting a gift, there are a number of crucial factors that must be taken into account on both the giving and receiving sides. 

The taxability of presents like money to and from family is a frequent concern for Canadian tax filers. What Canadian tax laws apply if you get money from friends or family members? 

How do gifts work?

A gift is a voluntary transfer of personal property without consideration, according to Black’s Law Dictionary. A gift must be given freely, without any contractual or other restrictions, according to the Canada Revenue Agency. In Bellingham v. Canada, the Federal Court of Appeal ruled that a gift had to be a free-will transfer of property. So, if someone gives something to someone else, it can only be considered a gift if it’s done voluntarily, without expecting anything in return, and isn’t constrained by any commitments.

Does Canada Charge a Tax on Gifts? 

There is no “gift tax” according to the Canada Revenue Agency, therefore whether you have given or received money from someone, no taxes need to be paid. If you’re attempting to deduct what you gave to your family, friends, or other loved ones, there is likewise no deduction. 

Since the IRS in the USA does charge for these funds, it is highly unclear whether or not these types of funds are taxable. As we share the same media and information with our friends over the border, contradictory information is so readily available. The simplest response is that money received or given is not taxable as long as no goods or services were transferred.

Who is eligible to receive gifts of money?

Usually, anybody can contribute money to whomever they like, but when giving money for a down payment, it should often come from a member of the close family. Though it might also be a sibling or a kid, a parent or grandparent is most frequently the case. Presents from friends are often not accepted for traditional mortgage loans since most mortgage lenders prefer that these gifts originate from immediate relatives. Depending on the lender, you could be permitted to receive a present from an aunt or a cousin who is more distantly related to you; nevertheless, you might need to provide proof of your relationship.

Tax credits for gifts

A taxpayer may claim tax credits under section 118.1 of the Income Tax Act if they provide money to a qualifying donee, such as a registered charity or a registered municipality. Tax credits give taxpayers the opportunity to offset the full amount of their tax obligations. In general, the tax credit will only be for the amount of the gift that qualifies. The difference between the fair market value of the donated item and the amount of an advantage, if any, is the qualifying amount of a gift. The worth of the consideration the present receiver gives the donor is one of the benefits.

Takeaways

In short, in Canada, how much money can you gift a friend or family member without them being taxed for it? There is no “gift tax” according to the Canada Revenue Agency. Money received or given is not taxable as long as no goods or services were transferred. Since the IRS in the USA does charge for these funds, it is highly unclear whether or not these types of funds are taxable. A taxpayer may claim tax credits under section 118.1 of the Income Tax Act if they provide money to a qualifying donee, such as a registered charity or a registered municipality.

Tax credits give taxpayers the opportunity to offset the full amount of their tax obligations. In general, the tax credit will only be for the amount of the gift that qualifies.