Tax Q: Parents want to help with down payment

[Canuck_2005]

Hello,

I am in the market for my first home and my parents want to help me with a substantial down payment. Do I have to pay income tax on this money?

[rdtx2002]

no

[James_TheVirus]

No, but make sure you get a signed gift letter though.

[Wonderdollar]

Parents can always help their kids by giving them down payment money by way of Gift. There is no tax to be paid on the Gift received in Canada. However, the banks would require a gift letter from your parents stating that the money is a gift to you for helping with the down payment and is never to be repaid back and you would be fine.

[sunnybono]

Another thing I would tell recipients of gift money, especially to the parents who are donating the funds, is to place a second mortgage on the property in order to protect their investment.

sk

[ShopperfiendTO]

It would be no if it was cash they were giving.

If they have to realize a captial asset to get the cash to you, e.g., sell shares or mutual funds, they may have to pay tax on any capital gains that resulted from that sale. That is, you don't pay tax but they may have to.

[Buggy166]

the jist of it, if its not INCOME (you didnt provide services for which your parents paid you as in like a business), then you have nothing to worry about tax wise.

the rest has been pretty much covered by others in terms of gift letter and whatnot.

[speedyforme]

Another thing I would tell recipients of gift money, especially to the parents who are donating the funds, is to place a second mortgage on the property in order to protect their investment.

sk

+1, my aunt did this when she helped pay for the downpayment of my cousin's house to ensure if anything no one else gets to take the downpayment

[sslinn]

If it is a gift there is no investment.

[rename]

I have the same situation and I got my answer already, thanks to all answered.

but addition to it;
My Parents are not in Canada, and they will be transferring the money either through a bank or another channel (not a cash in a bag)
Would I need to pay tax for that? Or is there anything i need to be careful about?

[canehdianman]

Another thing I would tell recipients of gift money, especially to the parents who are donating the funds, is to place a second mortgage on the property in order to protect their investment.

sk

If they are gifting the cash, they cannot register an interest in the property.

The bank will REQUIRE your parents to sign a gift letter (to ensure that the Bank has a priority charge over the property).

After the bank has registered their charge, I suppose your parents could register an interest, but given the gift letter, it wouldn't be enforceable.

[ShopperfiendTO]

If it is a gift there is no investment.

The two are mutually exclusive concepts.

If the parents are gifting cash in their savings account, then there's no tax.

If the parents are gifting cash obtained from selling their investments, then the parents may have to pay tax that results from them cashing in on their investment.

[Wing Nut]

The OP doesn't say that this is a gift. It may be a loan, either with interest or interest free. If it's with interest, the parents have to declare that income. If it's a loan there are other issues, such as how the parents can secure their loan.

One way is to put the parents on title. If this is done for reasons of estate-planning, convenience or whatever, and if there is documentation of this, the parents don't have to declare any gains as capital gains for tax purposes. I have clients who have done this and have given me a letter to keep in their file outlining the reasons they are on title on children's homes.

[alanbrenton]

At what age can someone in Ontario own a property?

[poop_on_you]

Another thing I would tell recipients of gift money, especially to the parents who are donating the funds, is to place a second mortgage on the property in order to protect their investment.

sk

Protect their investment loss from their own kids?

The bank is the first mortgage and gets first dibs in the event of foreclosing after government taxes. The left over money goes the owner.

I mean, it seems kind of cold that you would take whatever money left from your kids in the event that they lose their job or can't afford their mortgage payments.

[Wing Nut]

^ What taxes?

[alanbrenton]

At what age can someone in Ontario own a property?

I tried to do a search and it seems the age is 18. Can anyone confirm?

I guess there are advantages to having many trustworthy and obedient children in Canada. :)

Thanks.