Cash Wedding Gifts: Taxable In Canada?

Cash gifts for weddings are generally tax-free in Canada, regardless of the giver's and receiver's relationship. This is because taxes are already paid on the money when it is earned. However, gifts from employers are considered taxable benefits and are subject to taxation. Gifts of property, on the other hand, are taxable and subject to capital gains tax based on the fair market value at the time of gifting.

Cash gifts are tax-free in Canada

No Gift Tax in Canada

Canada does not levy a gift tax on cash gifts. This means that Canadians can give and receive monetary gifts without having to pay taxes on them. This applies regardless of the relationship between the giver and the recipient. So, whether you are giving a cash gift to a family member, a friend, or someone else, it will be tax-free for both parties.

No Limit on Gift Amount

There is also no limit on the amount of money that can be gifted in Canada. Whether you give $500 or $30,000, it is entirely tax-free. This means that Canadians can give and receive large sums of money as gifts without having to worry about tax implications.

Inter-Vivos and Testamentary Gifts

There are two main types of gifts: "inter-vivos" and "testamentary". Inter-vivos gifts are those given during the giver's lifetime, while testamentary gifts are given after their death and are usually specified in their will. Both types of gifts are tax-free in Canada when given in the form of cash.

Gifts from Employers

It is important to note that gifts from employers to employees are treated differently and are generally considered taxable benefits. These types of gifts fall under the category of "Gifts, Awards, and Social Events" for tax purposes.

Gifts of Property

While cash gifts are tax-free, gifts of property, such as real estate or securities, are treated differently. Gifts of property are subject to taxes, specifically the Capital Gains Tax. This tax is based on the fair market value of the property at the time of gifting. It is important to consider the tax implications when gifting property, as they can be significant.

There is no limit on how much you can gift someone

In Canada, there is no limit on how much you can gift someone. This means that you can gift any amount of money without being taxed. For instance, you can gift $500 or $30,000, and it will be entirely tax-free. This is because you have already paid taxes on the money you are giving away.

It is important to note that this only applies to gifts given in the form of cash or money. Gifts of property, such as real estate or securities, are treated differently and may be subject to taxes. If you give away a property that is not your primary residence, you will have to pay capital gains tax based on the fair market value at the time of gifting.

Additionally, gifts from employers to employees are also treated differently and are generally considered taxable benefits.

Gifts from an employer are taxable

In Canada, gifts from an employer to an employee are typically considered a taxable benefit. This means that the employee will have to pay taxes on the gift's value. However, there are some exemptions and special cases to consider.

Firstly, it is important to distinguish between cash, near-cash, and non-cash gifts. Cash gifts always constitute a taxable benefit. Near-cash gifts, which include items that can easily be converted into cash, such as gift cards or certificates, are also considered taxable. On the other hand, non-cash gifts, like a physical item or a specific ticket to an event, may be exempt from taxation under certain conditions.

The Canada Revenue Agency (CRA) has outlined specific guidelines for non-cash gifts from employers to be exempt from taxation. These include:

• A limit on the total value of non-cash gifts received by an employee in a year, which is currently set at $500 in fair market value.
• Recognition of long service, where employees may receive non-cash gifts valued at less than $500 once every five years.
• Social events or parties organized by the employer, where the cost per person is $100 or less.
• Meals or other hospitality services provided by the employer at work-related functions, such as meetings or training sessions.
• Valueless items, such as coffee, tea, snacks, mugs, t-shirts, etc.

It is worth noting that these exemptions do not apply if the gift or award is provided to a non-arm's length employee, such as a relative or shareholder. In such cases, the gifts will be considered taxable.

Additionally, the CRA differentiates between gifts and rewards. Gifts are typically given on special occasions like religious holidays, birthdays, weddings, or the birth of a child. Rewards, on the other hand, are usually tied to work performance and are considered taxable benefits.

Employers can give an unlimited number of non-cash gifts, but if the total fair market value exceeds $500, the excess amount must be reported as a taxable benefit on the employee's T4 slip.

Gifts of property are taxable

In Canada, gifts of property are treated as a disposition, and the giver is deemed to have sold the property at fair market value (FMV). This means that the giver will have to pay tax on any resulting capital gain. The FMV is also deemed to be the "cost" to the person receiving the gift.

If the gifted property is given to a spouse, you may be able to defer paying tax. If your spouse sells the property, tax will be paid by the transferring spouse on any capital gain made. The capital gain will be calculated by using the purchase price and the selling price.

If you give a gift of property to someone other than a spouse, you will be considered to have sold the property at FMV for tax purposes. If the FMV is more than what you paid for the item when you acquired it, you will be considered to have received a capital gain, which you will have to pay tax on.

If you are an artist, a dealer, a collector, or an individual carrying on a business, different tax rules apply when you donate property from your inventory.

Gifts of appreciated securities or real estate are taxable

In Canada, gifts of appreciated securities or real estate are taxable. This is because the giver of the gift is deemed to have sold the property at fair market value (FMV) and will, therefore, have to pay tax on any resulting capital gain. This is in addition to their other income in the year the gift is made and can amount to a tax rate of up to 27% of the capital gain.

For example, if you give a piece of land that has appreciated in value since you acquired it, you will generally be taxed on 50% of the appreciation. This is because the appreciation is considered a capital gain and is added to the giver's tax return.

It is important to note that the tax implications of gifting appreciated securities or real estate can be complex and may depend on various factors such as the province of residence and the type of property involved. As such, it is recommended to consult with a tax and legal expert before making any gifts of appreciated securities or real estate.

Frequently asked questions