Boyer & Boyer, CPA
January 12th, 2026
Selling or transferring an inherited cottage in Canada often triggers capital gains tax, even though Canada does not have an inheritance tax.
In most cases, the tax arises either at death through a deemed disposition or later when the cottage is sold. Executors and beneficiaries are frequently surprised by the size of the tax bill, especially when the property has been owned for decades.
This 2026 Guide Explains:
- How capital gains on inherited cottages work in Canada
- How adjusted cost base is determined
- When the principal residence exemption may apply
- How to reduce CRA audit risk through proper documentation and planning
Key Takeaways:
- Canada does not charge inheritance tax, but capital gains tax often applies
- A deemed disposition occurs at death based on fair market value
- Adjusted cost base is usually reset to fair market value at inheritance
- Capital improvements increase ACB, routine maintenance does not
- The principal residence exemption may reduce tax if designated correctly
- Professional appraisals and records are critical for CRA support
This Guide Is Intended For:
- Executors managing an estate that includes a cottage or vacation property
- Beneficiaries who have inherited a cottage and are considering a sale
- Families planning for intergenerational cottage transfers in Ontario
