As a Canadian taxpayer, you might be aware that gifting assets can have tax implications. However, did you know that giving gifts to your spouse or children can also impact your taxes? In this article, we will provide an overview of the tax implications of gifting assets to your spouse or children.

Gifts to Spouse

In Canada, gifts to your spouse are generally not taxable. However, if the gifted asset generates income, the income generated from the asset is taxable in the hands of the spouse. It’s essential to keep proper documentation of the gifted asset’s value at the time of transfer. This information can be useful when determining the adjusted cost base of the asset in the future. If the asset is sold, the adjusted cost base will be used to calculate the capital gain or loss.

Gifts to Children

When gifting assets to children, the tax implications are a bit more complicated. If the gifted asset generates income, the income is taxable in the hands of the child. However, there are a few exceptions to this rule. If the child is under the age of 18, the income generated from the gifted asset is attributed back to the parent who gifted the asset. Additionally, if the child is a full-time student, the income from the gifted asset may not be attributed back to the parent, depending on the situation.

It’s important to note that if the gifted asset is real property, there may be tax implications when transferring ownership. For example, if the gifted asset is a rental property, the transfer of ownership may result in a deemed disposition, which could trigger a capital gain or loss.

Another important consideration when gifting assets to children is the use of trusts. Trusts can be a useful tool to distribute assets to children while minimizing tax implications. However, setting up a trust can be complex, and professional advice is recommended to ensure that the trust is set up correctly and that tax implications are minimized.

In conclusion, gifting assets to your spouse or children can have tax implications that should not be ignored. Proper planning and documentation can help minimize these implications and ensure that you are not caught off guard when tax time comes around. If you are considering gifting assets to your spouse or children, it’s essential to seek professional advice to ensure that you are making informed decisions and minimizing tax implications.

If you need assistance with tax planning or have any questions regarding gifts to your spouse or children, please contact JTT Accounting for professional accounting services.