Understanding Capital Gains in Ontario
Our family camp has been in our lives for three generations. It’s where we’ve gathered for summer weekends, celebrated birthdays, taught kids to fish, and shared a hundred stories around the dinner table. We’re not selling it. We’re doing everything we need to keep it in the family. But as we update the ownership and prepare for the next generation to take over, we’ve had to navigate something that caught us off guard: capital gains tax.
Even if you're not putting a property on the market, transferring ownership within the family through gifting, inheritance, or adding a name to title, can still trigger capital gains. And understanding how it all works is crucial if you want to keep a family property without facing unexpected tax burdens.
Whether you call it a cottage or, like us in Northern Ontario, a camp, this guide is here to help you understand what to expect and how to plan ahead.
What Is Capital Gains Tax?
In simple terms, capital gains happen when you sell (or transfer) a capital asset, like real estate or investments, for more than what you paid for it. In Canada, 50% of the profit is taxable as part of your income.
It’s important to note:
Your primary residence is generally exempt from capital gains tax.
A secondary property like a camp, cottage, or rental is taxable.
Even gifting or transferring a property to family can be seen by the CRA as a “deemed disposition”, meaning it’s treated as if it was sold at fair market value, even if no money changed hands.
Real Example: Transferring the Family Camp
Let’s say your parents bought the family camp in the 1980s for $70,000. It’s now worth $370,000, and they want to pass it on to you and your siblings. Over the years, they put $50,000 into major improvements (new roof, deck, septic).
Adjusted Cost Base (ACB): $70,000 + $50,000 = $120,000
Fair Market Value (FMV) today: $370,000
Capital Gain: $370,000 - $120,000 = $250,000
Taxable Portion: 50% of $250,000 = $125,000 added to their income
This could significantly increase their tax owing for the year, even though no money was made in a traditional sale.
Tips for Families Keeping Property in the Family
1. Talk to a tax professional or accountant early.
They can help you understand if there’s a way to structure the transfer that minimizes taxes or prepare for the cost if it’s unavoidable.
2. Keep all receipts and documentation.
Renovations, major upgrades, legal fees these all increase your ACB and reduce your taxable gain.
3. Plan ahead for probate and succession.
Including the camp in a will or trust doesn’t necessarily avoid capital gains, but it can help reduce stress and uncertainty when the time comes.
4. Be transparent and talk as a family.
It’s an emotional topic having open conversations now can save a lot of heartache later.
Can You Avoid Capital Gains?
There are some exemptions for example, if the camp was used as a principal residence for any period of time, you may be eligible to claim that exemption for those years. But full exemptions are rare when it comes to secondary properties.
Final Thoughts
Keeping a family camp isn’t just about land and taxes it’s about legacy. But legacy planning comes with logistics. Understanding how capital gains works gives you the power to make informed, intentional decisions that will protect your family’s memories and your finances.
If you’re starting to think about selling or transferring a family property, I’d be happy to chat, share local insights, or connect you with a trusted accountant or lawyer who specializes in this kind of planning.
From one Northern Ontario family to another yes, we still call it a camp, and no, we wouldn’t have it any other way.
Abbie Drolet, Broker
