Estate tax calculator (the deemed disposition)
Canada has no inheritance tax — but death triggers a final-return income tax bill: your capital gains are deemed realized and your whole RRSP/RRIF is cashed into income. See the estimate for your province, and how the spousal rollover defers it.
The estate at death
Deferred by the spousal rollover
Because everything passes to a spouse or common-law partner, the deemed disposition is postponed — the final return owes nothing on these assets now. The liability carries forward to the second spouse’s death, so plan for it then.
What this is — and isn't
This is the income tax on the final return from the deemed disposition. It is separate from probate fees (a provincial charge on the estate) and assumes your principal residence is exempt. Estimates use 2026 combined marginal rates; confirm with an accountant. See the deemed-disposition guide.
Frequently asked questions
What is the deemed disposition at death?
The Canada Revenue Agency treats you as having sold all your capital property at fair market value immediately before death, even though nothing was actually sold. The resulting capital gain is reported on your final (terminal) T1 return, and registered plans like an RRSP or RRIF are treated as fully cashed out and added to income that year.
Does Canada have an inheritance or estate tax?
No. Beneficiaries pay no tax on an inheritance. The tax at death is the income tax on the deceased’s final return — driven by the deemed disposition above — plus provincial probate fees. There is no separate estate or inheritance tax in Canada.
How is the capital gains portion taxed?
At the 50% inclusion rate: half of every dollar of gain is added to income on the final return and taxed at the marginal rate. This calculator excludes your principal residence, which is generally exempt under the principal residence exemption — only second homes, cottages, rentals and non-registered investments count.
How does the spousal rollover work?
Assets left to a surviving spouse or common-law partner (or a qualifying spousal trust) transfer on a tax-deferred basis — the deemed disposition is postponed until the second spouse dies or sells. Tick the spousal-rollover box above and the final-return tax drops to $0, with the liability carried forward to the second death.
Why is the RRSP/RRIF the biggest part of the bill?
Unlike capital gains (only half taxable), the entire value of an RRSP or RRIF is added to income in the year of death unless it rolls to a spouse or a financially dependent child. A large RRIF can push the final return into the top marginal bracket in a single year — often the single biggest tax event of a person’s life.
How can I reduce the tax bomb?
Common moves: use the spousal rollover to defer to the second death; draw down the RRSP/RRIF earlier to smooth income across years; use in-kind donations of securities to erase gains; buy life insurance to fund the bill so heirs needn’t sell assets; and plan the principal residence exemption across a house and cottage. See the deemed-disposition guide.
Educational tool, not tax advice. Models the federal + provincial income tax on the final return from the deemed disposition at death — full RRSP/RRIF inclusion plus the 50% taxable portion of capital gains — at 2026 combined marginal rates. It assumes the principal residence is exempt, applies no other credits or deductions, and does not model the alternative minimum tax, the qualified-small-business or farm/fishing exemptions, or U.S. estate tax. Probate fees are separate. Confirm with a qualified accountant or estate lawyer.