Ask MoneySense
Is there a tax on cash gifts to children in Ontario?
—Virginia
Tax on gifts and loans to children in Canada
When you give cash to a child, Virginia, there are generally no tax implications for the recipient. They do not have to worry about paying tax on it, no matter where they live within Canada.
There may or may not be other tax implications, though. So, I will outline cases where tax may result from the act of giving or from a child earning income on a gift.
When does a deemed disposition apply?
If you transfer an asset to a child, this generally results in a deemed disposition. This means that when you transfer stocks or real estate or shares of a private company, it’s as if you sold these assets at their fair market value.
This deemed disposition applies during your life and upon your death. When you die, you are deemed to dispose of your assets. Only assets left to your spouse can be tax-deferred. Assets your children inherit are subject to tax payable by your estate before they are distributed.
However, unlike capital assets, cash does not appreciate in value. So, there’s no deemed disposition on cash, and there’s no tax to pay unless the cash is withdrawn from a tax-deferred account, like a registered retirement savings plan (RRSP) or a corporate bank account. In those cases, the withdrawal may be considered taxable income to the parent.
Also read
Income Tax Guide for Canadians
Deadlines, tax tips and more
Income attribution rules
When you give cash to an adult child, all income and capital gains earned from that money are taxable to them.
When you give cash to a minor child and the gift is invested, there may be tax implications for you. Capital gains are taxable to the child. But interest and dividend income are attributed back to the parent. The parent must report this income on their tax return, even when the account is in a minor child’s name.
There may also be tax implications if you loan cash to an adult child for the purpose of investing. If the loan does not bear interest, or the interest rate is below the Canada Revenue Agency’s (CRA) prescribed rate at the time the loan is made—currently, the prescribed rate is 4%—interest and dividends are attributable to the parent. Capital gains are always taxed to the child, though.
The only way you can loan money to an adult child without parental attribution is to lend at a rate that matches the CRA prescribed rate at the time of the loan.
Income tax differences between provinces and territories
You asked about Ontario specifically, Virginia. There are no differences between provinces and territories regarding income tax on gifts and loans. However, other differences may apply. For example, if you loan money and you do not have commercial repayment terms, you may or may not be able to enforce the loan. That is a provincial or territorial matter.
There can also be different implications involving family law, which generally falls under provincial and territorial jurisdiction. So, if you gift or loan money to a child who is married or in a common-law relationship, there may be considerations about what happens with that money if your child has a relationship breakdown.
U.S. gift tax for U.S. citizens in Canada
If you’re a U.S. citizen in Canada, a gift may result in U.S. gift tax for the donor or, at the very least, the requirement to file a gift tax return.
There’s an annual gift tax exclusion of USD$19,000 per person. Gifts in excess of this limit to an individual recipient are either subject to gift tax or, more commonly, will result in a reduction to the giver’s lifetime exemption of USD$13.99 million.
U.S. gift and estate tax limits are projected to fall to about USD$7 million on Jan. 1, 2026—down from USD$13.99 million in 2025. However, the U.S. Congress is expected to act before that date, so the post-2025 estate and gift tax rules are currently unclear.
So, is there tax payable on a cash gift?
There are generally no tax implications for the recipient of a cash gift in Canada. The gift giver is usually the one subject to tax implications, depending on the situation.
Cash gifts to adult children generally have no tax impact on neither the parent nor the child. Only gifts of assets with deferred capital gains, gifts to minor children, gifts from U.S. citizens living in Canada, and loans with no or low interest tend to have tax considerations.
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