Selling a Parent's House After Death in Ontario: The Taxes and Filings to Expect

The short answer

Selling a parent’s house after death in Ontario touches three levels of government. The Canada Revenue Agency (CRA) cares about the final tax return and any gain the estate makes afterward. Ontario cares about probate and estate administration tax. The City of Toronto cares about whether the empty house is declared.

This post explains how those pieces fit together so you know which questions to bring to your professionals. It is general information and not legal or tax advice. Every estate is different, so confirm your own situation with an estates lawyer and an accountant.

What the CRA treats as happening on the date of death

The CRA says that when a person dies they are considered to have sold all their property just prior to death, even though no sale takes place. This is called a deemed disposition. It can produce a capital gain or loss, which is reported on the final return.

For a house, the amount used is the fair market value on the date of death. That number matters twice. It sets the figure reported on the final return and it becomes the starting point for measuring any gain if the estate or a beneficiary sells later. Keep the appraisal or written opinion of value in the estate file.

Property that passes to a surviving spouse or common-law partner who is a resident of Canada can avoid a gain or loss on the final return. The CRA says a principal residence designation for the period before death is not required in that case. That is one reason the answer changes with who inherits the home.

The principal residence exemption on the final return

Most parents’ homes were their principal residence for the years they owned them. The principal residence exemption can remove the gain for those years. It is not automatic.

The CRA says that even where the entire gain is exempt, the legal representative must still designate the property as a principal residence on the final return. That means completing Schedule 3 (Capital Gains or Losses) and Form T1255. The designation only applies until the date of death.

Two practical points follow:

• Keep a record of the years. The CRA advises keeping a record of the years the person who died could have designated the property.
• Check what else was owned. A cottage or a second property competes for the same designation, which is a question for the accountant.

Who files the final return and the T3

The legal representative, usually the executor or administrator, files the returns. On the final return they sign and indicate their title. The CRA says the return is mailed to the tax centre and that tax software cannot currently submit it.

Families often confuse the two returns:

Return	What it covers	Who files
Final T1 return	Income to the date of death and the deemed sale of property at death	Legal representative
T3 trust return	Income or gains the estate earns after death, including a gain on the house if the estate sells it	Legal representative for the estate

The CRA says an estate is a testamentary trust that arose on and as a consequence of a death. It generally has to file a T3 return if it realizes a gain or receives payments after death. The CRA also notes that an estate may not need to file where it earned no income before distribution.

When the estate sells later: change in value since death

The house usually sells months after the date of death while the court process runs. The gain after death is measured from the value at death, not from what your parent paid decades ago.

Here is an illustration with round numbers, not a real estate. Suppose the house was worth $1,500,000 on the date of death and the estate sells it for $1,560,000.

Step	Amount
Sale price	$1,560,000
Value on the date of death	$1,500,000
Increase since death	$60,000

The increase of $60,000 is the figure the accountant starts from. The exact tax depends on selling costs and on who holds the property when it sells, so treat the example as a way to see the logic. If the house sells for less than its value at death the result runs the other way.

This is why a defensible value at death matters. Our free home valuation can support the number your lawyer and accountant work from. Toronto house prices shows what the market has been doing by property type.

Final return deadlines

The CRA sets the due date by the date of death. The dates below come from its filing and payment page.

Date of death	Final T1 return due
January 1 to October 31	April 30 of the year following the death
November 1 to December 31	6 months after the death, on the same calendar day

The CRA lists a later filing date for a person or spouse who ran a business. A T3 return is due 90 days after the trust’s tax year-end or after the final distribution of assets if the trust ceases to exist. Payment of a balance owing follows its own dates, so confirm them with the accountant.

The clearance certificate before anything is distributed

A clearance certificate confirms that the estate has paid all income tax and other amounts owing when it was issued. It lets the legal representative distribute assets without the risk of personal responsibility for unpaid amounts. Without one, the CRA says the representative is personally liable up to the value of the assets distributed.

The CRA says not to submit the request at the same time as the required returns, because that delays their review. Apply after the returns are filed and assessed and the amounts owing are paid or secured. The CRA sends an acknowledgement within 45 days and says the assessment can take up to 120 days when the documents are complete.

For a family hoping to close the estate quickly, this is often the slowest step. Ask the lawyer to hold back enough from the sale proceeds until the certificate arrives.

Ontario probate and estate administration tax

Ontario says an estate normally must be probated where the person who died owned real property. It advises obtaining the certificate before anyone enters into an Agreement of Purchase and Sale. Estates valued at up to $150,000 can use a Small Estate Certificate and others apply for a Certificate of Appointment of Estate Trustee.

Ontario’s estate administration tax for applications on or after January 1, 2020 works like this:

Estate value	Tax
$50,000 or less	None, but a return must still be filed
Above $50,000	$15 for every $1,000 (or part thereof) of the value of the estate

Values are rounded up to the nearest thousand and a mortgage or lien on real property can be deducted from its value. The tax is due the day the certificate is issued and is paid as a deposit with the application. An Estate Information Return is due within 180 calendar days after the certificate is issued and records must be kept for four years.

Our post on selling a house before probate in Ontario explains the court timing in more depth. If your parent is still alive and a power of attorney is in play, read about selling a parent’s house with power of attorney in Ontario first.

Carrying costs and the Vacant Home Tax while you sell

While the house waits for the certificate and a buyer, the estate keeps paying property tax and utilities. Our post on Toronto property tax explains how the bill is set and how it is adjusted when the house sells. Heat and insurance on an unoccupied house are also the estate’s to manage, so tell the insurer the house is empty.

Toronto adds the Vacant Home Tax. The City says residential owners must declare occupancy status every year and that a property with no declaration by the deadline is deemed vacant. The rate has been 3 percent of the property’s Current Value Assessment since the 2024 tax year.

The City’s death of owner exemption applies where the property was vacant for six months or more in the year because an owner died. It may be claimed for up to three consecutive taxation years and needs a copy of the death certificate. It still has to be claimed through the declaration.

What to do next

Work through these in order and write down who is responsible for each:

1. Ask the estates lawyer how title was held and whether probate is needed.
2. Get a value for the house as of the date of death and keep it with the estate records.
3. Ask the accountant about the final return, the principal residence designation and the T3.
4. Make the Vacant Home Tax declaration and claim the exemption that fits.
5. Plan the sale around the certificate and keep proceeds in the lawyer’s trust account until the clearance certificate is in hand.

Our guide to selling an estate home in Toronto covers the whole sequence, including how we work alongside your lawyer and accountant. If you are the estate trustee for a Toronto house and want to talk through timing, contact us.