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Preparing Returns for Deceased Persons 2023

T4011(E) Rev. 23

The CRA's publications and personalized correspondence are available in braille, large print, e-text, and MP3. For more information, go to Order alternate formats for persons with disabilities or call 1-800-959-8281.

Table of contents

Before you file

Find out if this guide is for you

Use this guide if you are the legal representative who has to file a 2023 Income Tax and Benefit Return for a deceased person.

Find out which tax package is for you

You should use the tax package for the province or territory where the deceased lived at the time of death. To find out how to get forms, schedules, returns and worksheets, or to request a printed copy of an income tax package for a particular province or territory, go to Order forms and publications.

Note

If you cannot get a return for the year of death, use a blank one from a previous year. In the top right corner of page 1, write the year for which you are filing. The Canada Revenue Agency (CRA) will assess the return based on the legislation in effect for the year of death.

New for 2023

This section generally includes proposed, announced and enacted tax changes for the year. When tax changes become law as proposed or announced, the yare effective for 2023 or as of the dates given. If new legislation is introduced, information will be available at What's new for 2023?

New items are flagged with NEW! throughout this guide.

The CRA's services

Electronic remittances or payments above $10,000

As of January 1, 2024, remittances or payments to the Receiver General of Canada should be made as an electronic payment if the amount is more than $10,000. Payers may face a penalty unless they cannot reasonably remit or pay the amount electronically. For more information, go to Payments to the CRA.

Individuals and families

Advanced Canada workers benefit (ACWB)

Advance payments of the Canada workers benefit (CWB) are now issued automatically under the ACWB to those who received the benefit in the previous tax year. As a result, Form RC201, Canada Workers Benefit Advance Payments Application, has been discontinued.

Starting in 2023, amounts from your RC210 slip are to be reported on Schedule 6, Canada Workers Benefit, in order to calculate the amount to enter on line 41500 of your return. If you have an eligible spouse, you can choose who will claim the basic amount for the CWB regardless of who received the RC210 slip for the basic amount.

For more information about the ACWB, go to Canada Workers Benefit.

Climate action incentive payment (CAIP)

The Government of Canada has announced its intention to double the rural supplement to 20% starting in April 2024. It also intends to continue using the census metropolitan areas determined by the 2016 Census for the 2023 and 2024 tax years. For more information about the CAIP, go to Climate action incentive payment.

Deduction for tools (tradespersons and apprentice mechanics)

Starting in 2023, the maximum employment deduction for eligible tradespersons' tools has increased from $500 to $1,000. As a result, the threshold for expenses eligible for the apprentice mechanics tools deduction has also changed. For more information about tools deductions for tradespersons and apprentice mechanics, go to Line 22900 – Other employment expenses or see Guide T4044, Employment Expenses.

Federal, provincial and territorial COVID-19 benefit repayments

Federal, provincial and territorial COVID-19 benefit repayments made after December 31, 2022 can be claimed as a deduction on line 23200 of the deceased person's 2023 return.

First home savings account (FHSA)

The FHSA is a new registered plan to help individuals save for their first home. Starting April 1, 2023, contributions to an FHSA are generally deductible and qualifying withdrawals made from an FHSA to purchase a qualifying home are tax-free. If the deceased person opened one or more FHSAs in 2023, complete Schedule 15, FHSA Contributions, Transfers and Activities. For more information about the FHSAand what happens when the FHSA holder dies, go to First Home Savings Account (FHSA).

Multigenerational home renovation tax credit (MHRTC)

The MHRTC is a new refundable tax credit that allows an eligible individual to claim certain renovation costs to create a secondary unit within an eligible dwelling so that a qualifying individual can reside with their qualifying relation. If eligible, you can claim up to $50,000 in qualifying expenditures for each qualifying renovation completed, up to a maximum credit of $7,500 for each claim you are eligible to make. For more information, go to Multigenerational home renovation tax credit (MHRTC).

Property flipping

Starting January 1, 2023, any gain from the disposition of a housing unit (including rental property) located in Canada, or a right to acquire a housing unit located in Canada that was owned or held by the deceased person for less than 365 consecutive days before its disposition is deemed to be business income and not a capital gain, unless the property was already considered inventory or the disposition occurred due to, or in anticipation of certain life-events. For more information about flipped property and life-event exceptions, go to Residential Property Flipping Rule or see Schedule 3, Capital Gains (or Losses).

Return of fuel charge proceeds to farmers tax credit

The Return of fuel charge proceeds to farmers tax credit is now available to self-employed farmers and individuals who are members of a partnership operating a farming business with one or more permanent establishments in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island or Saskatchewan. If eligible, a portion of the deceased person's fuel charge proceeds may be returned to them. For more information, go to Line 47556 – Return of fuel charge proceeds to farmers tax credit.

Definitions

Adjusted cost base (ACB) - This is usually the cost of a property, plus any expenses to acquire it, such as commissions and legal fees.

The cost of a capital property is its actual or deemed cost, depending on the type of property and how it was acquired. It also includes capital expenditures, such as the cost of additions and improvements to the property. You cannot add current expenses, such as maintenance and repair costs, to the ACB of a property.

For more information on ACB, see Archived Interpretation Bulletin IT-456R, Capital Property - Some Adjustments to Cost Base, and its Special Release.

If the deceased filed Form T664 or T664(Seniors), Election to Report a Capital Gain on Property Owned at the End of February 22, 1994, the ACB of the property may change. For more information, see Guide T4037, Capital Gains.

Administrator – There may not be a will or the will may not name an executor. In this case, a court will appoint an administrator to handle the deceased’s estate. An administrator is often the spouse, common-law partner, or the next of kin.

Advantage - See the definition of Eligible amount of the gift.

Alter ego trust – This is a trust created after 1999 by a settlor who was 65 years of age or older at the time the trust was created, for which the settlor is entitled to receive all the income that may arise during their lifetime, and is the only person who can receive, or get the use of, any income or capital of the trust during the settlor’s lifetime. A trust will not be considered an alter ego trust if it so elects in its T3 return for its first tax year.

Annuitant - Generally, an annuitant of a registered retirement savings plan (RRSP) or registered retirement income fund (RRIF) is the person for whom a retirement plan provides a retirement income. In certain circumstances, the surviving spouse or common-law partner may qualify as the annuitant when, because of the annuitant's death, they become entitled to receive benefits out of the retirement plan.

Annuity payment - This is a fixed periodic payment that a person has the right to receive, either for life or for a specific number of years. These payments represent a partial recovery of financing and a return (interest) on the capital investment.

Arm’s length – Refers to a relationship or a transaction between persons who act in their separate interests. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

Related persons are not considered to deal with each other at arm’s length. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.

Unrelated persons may not be dealing with each other at arm’s length at a particular time. Each case will depend upon its own facts. The following criteria will be considered to determine whether parties to a transaction are not dealing at arm’s length:

For more information, see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.

Capital cost allowance (CCA) - In the year the deceased bought a depreciable property, such as a building, they could not deduct the full cost. However, since this type of property wears out or becomes obsolete over time, prior to death, they can deduct its capital cost over a period of several years. This deduction is called CCA. The deceased cannot claim it for the fiscal period that ends on the date of death.

When talking about CCA, a reference is often made to a class of property. Group depreciable properties into their separate classes. Base any CCA claim on the rate assigned to each class of property.

Capital property - This includes depreciable property and any property that, if sold, would result in a capital gain or a capital loss. This type of property is usually bought for investment purposes or to earn income. Capital property does not include the trading assets of a business, such as inventory. Some common types of capital property include cottages, land, buildings, equipment used in a business or rental operations, and securities such as stocks, bonds, and units of a mutual fund trust.

Common-law partner - This is a person you are living with and have a conjugal relationship with who is not your married spouse, and at least one of the following conditions applies:

Deemed disposition - This expression is used when a person is considered to have disposed of a property, even though a sale did not take place.

Deemed proceeds of disposition - This is an expression used when a person is considered to have received an amount for the disposition of property, even though the person did not actually receive that amount.

Depreciable property - This is usually capital property used to earn income from a business or property. The capital cost can be written off as CCA over a number of years.

Eligible amount of the gift - This is generally the amount by which the fair market value (FMV) of the gifted property exceeds the amount of the advantage, if any, received or receivable for the gift. There may be situations where the eligible amount may be deemed to be nil or the fair market value may be deemed to be less than the actual fair market value of the property. For more information, see Guide P113, Gifts and Income Tax, or Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.

The advantage is generally the total value of all property, services, compensation, or any other benefit that the donor, or a person not dealing at arm's length with the donor, is entitled to as partial consideration for, in gratitude for, or in any other way related to the gift. The advantage may be contingent or receivable in the future.

The advantage also includes any limited-recourse debt in respect of the gift at the time it was made. For example, there may be a limited-recourse debt if the property was acquired as part of a gifting arrangement that is a tax shelter. In this case, the eligible amount of the gift will be entered in box 13 of T5003 slip, Statement of Tax Shelter Information. For more information on tax shelters and gifting arrangements, see Guide T4068, Guide for the Partnership Information Return (T5013 forms).

Executor - This is an individual or trust institution named in a will or appointed by a court to settle the deceased's estate.

Fair market value (FMV) - This is usually the highest dollar value that you can get for your property in an open and unrestricted market between a willing buyer and a willing seller who are dealing at arm’s length.

Graduated rate estate (GRE) – A GRE of an individual at any time is the estate that arose on and as a consequence of the individual’s death, if that time is no more than 36 months after the death of the individual, and the estate is at that time a testamentary trust that meets all of the following conditions:

Liquidator - In Quebec, the liquidator is responsible for distributing assets of all estates. For estates with a will, the liquidator's role is similar to an executor's. For estates without a will, the liquidator acts as the administrator of the estate.

Locked-in - In this guide, locked-in means that the beneficiary who is to receive the property has a right to absolute ownership of it. No future event or development can take this right away. In order for a property to be locked-in:

Non-arm's length – This generally refers to a relationship or transaction between persons who are related to each other.

However, a non-arm’s length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances. For more information, see the definition of arm’s length.

Qualified donees - These are as follows:

Spouse - This is a person to whom you are legally married.

Testamentary spousal or common-law partner trust - This is a trust created, for the benefit of the surviving spouse or common-law partner, by provisions in the deceased's will, or by court order in relation to the deceased's estate made under any law of a province or territory that provides for the relief or support of dependants. The trust also must meet both of the following conditions:

For more information, see Income Tax Folio S6-F4-C1, Testamentary Spouse or Common-law Partner Trusts.

Testamentary debts - These are debts or liabilities of all kinds that an individual incurred and did not pay before death. They also include amounts payable by the estate because of death.

Undepreciated capital cost (UCC) - Generally, UCC is equal to the total capital cost of all the properties of a class minus any capital cost allowance claimed in previous years. When property of the class is disposed of, you also have to subtract from the UCC one of the following two amounts, whichever is less:

Chapter 1 - General information

Represent someone who died

You are the legal representative of a deceased person if any of the following situations apply:

See executor, administrator, and liquidator in Definitions.
If there is no will or executor:

Once the CRA has updated your account, you will have the ability to manage tax matters for the deceased person, or appoint a third-party representative, such as an accountant or lawyer, to handle the deceased person's tax matters on your behalf. For more information on how to authorize a representative, go to Representative authorization.

Notify the CRA that you are the legal representative

You should provide the CRA with the deceased’s date of death as soon as possible. You can advise the CRA by calling 1-800-959-8281 or 1-800-387-1193, by sending a letter, or a completed Request for the Canada Revenue Agency to Update Records form. This form is included with the Information Sheet RC4111, What to Do Following a Death.

As the legal representative, you may need information from the deceased person’s tax records. To get online access to their records, you will need to register for Represent a client.

Before the CRA can give you access to the tax records of the person who died, you must send the information below to the CRA, either through the “Submit documents” service in Represent a Client, or by mail to the Authorization Services Unit of the deceased person’s tax centre:

If you did not send this information upon the deceased’s death, send it with their final tax return.

To obtain online access to the deceased’s tax information, you must register for Represent a Client prior to sending a copy of the legal document or Form RC552. Once you have registered with the Represent a Client service, you will be assigned a representative identifier (RepID). Make sure to provide your RepID, in addition to the deceased’s SIN, when you are submitting all the required documents. For more information go to Representative authorization.

Otherwise, you may contact the CRA for the deceased’s tax information in writing. When you request information, include the words “The estate of the late” in front of the deceased’s name, and include your address so the CRA can reply directly to you.

Note

You also should advise Service Canada of the deceased’s date of death. For more information or to get the address of the Service Canada centre nearest you, call 1-800-622-6232 or go to Contact Employment and Social Development Canada (ESDC).

Your responsibilities as the legal representative

This guide deals only with your responsibilities under the Income Tax Act. Under the Act, as the legal representative, it is your responsibility to:

As the legal representative, you are responsible for filing a return for the deceased for the year of death. This return is called the final return. For more information, see Chapter 2.

You also have to file any returns for previous years that the deceased person did not file. If the person did not leave records about these returns, or if you cannot tell from existing records whether or not the returns were filed, contact the CRA at 1-800-959-8281.

If you have to file a return for a year before the year of death, use an Income Tax and Benefit Return for that year. Previous-year returns are available at CRA forms and publications or by calling 1-800-959-8281.

You have to file a T3 Trust Income Tax and Information Return (T3 return) to report the income the estate earned after the date of death. If the terms of a trust were established by the will or a court order in relation to the deceased individual's estate under provincial or territorial dependant relief or support law, you also have to file a T3 return for that trust. However, you may not have to file a T3 return (not to be confused with the final return, which always has to be filed) if the estate is distributed immediately after the person dies, or if the estate did not earn income before the distribution. In these cases, you should give each beneficiary a statement showing their share of the estate. See Guide T4013, T3 Trust Guide, for more information and, where a trust is created, to determine whether that return has to be filed. See Chart 2 to find out what income to report on the T3 return.

Unless included in your business income, any trustee, executor, or liquidator fees paid to you for acting as an executor are income from an office or employment. As the executor, you must report these fees on a T4 slip. For more information, see Employment by a trustee in Chapter 1 of the T4001, Employers' Guide - Payroll Deductions and Remittances.

Deemed Year-End of a Trust on Death

On the day of death of the following individuals, the particular trust will have a deemed year end:

The income that is deemed to be recognized by the trust upon the death of the beneficiary is taxed in the trust.

However, in the case of a testamentary spousal or common-law partner trust, a joint election between the trust and the deceased beneficiary’s graduated rate estate can be filed to report this income on the beneficiary’s final return. Report this income on the T3 slip issued to the beneficiary. For the joint election to be valid, all of the following requirements must be met:

As the legal representative of the deceased beneficiary, you need to attach to the final T1 return the joint election in the form of a letter which contains all of the following information:

Goods and services tax/harmonized sales tax (GST/HST) credit and Climate action incentive payment (CAIP) received after the date of death

Generally, GST/HST credit payments are issued on the fifth day of the month in July, October, January, and April. The CAIP is issued in the same months as the GST/HST credit, however it is issued on the 15th day of the month and begins in April. Since the CAIP is only applicable to certain provinces, the deceased must have been a resident of Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island or Saskatchewan on the first day of the payment month. If either of the payment dates for the GST/HST credit or the CAIP fall on a weekend or a federal statutory holiday, the payment will be made on the last business day before that day. If the deceased was receiving one or both of these amounts, the CRA may still send out a payment after the date of death because they are not aware of the death. If this happens, you should return the payment to the tax centre that serves your area.

Note

The CRA administers provincial and territorial programs that are related to the GST/HST credit and CAIP. If the deceased was receiving payments under one of these programs, you do not have to take any further action. The CRA will use the information provided to adjust other applicable credit program payments.

What if the deceased was single, separated, divorced, or widowed and received either the GST/HST credit or the CAIP?

If the recipient died before the scheduled month in which the CRA issued either the GST/HST credit or the CAIP, payments will no longer be issued in that person's name or to that person's estate.

If the recipient died during or after the scheduled month in which the CRA issues the credit and the payment has not been cashed, return it to the CRA so that they can send the payments to the person's estate.

If the deceased was getting a credit for a child, the child's new caregiver should contact the CRA at 1-800-387-1193, as they may qualify to receive the GST/HST credit or the CAIP for that child.

What if the deceased's GST/HST credit or the CAIP are for the deceased and their spouse or common-law partner?

The deceased's spouse or common-law partner may now be eligible to receive the GST/HST credit or the CAIP if they filed an income tax and benefit return. The GST/HST credit payments will be based on their net income alone. The CAIP will be revised based on the surviving spouse’s or common-law partner’s updated eligibility.

What if the surviving spouse's or common-law partner's GST/HST credit or the CAIP included a claim for the deceased?

If the surviving spouse’s or common-law partner’s entitlement included an amount for the deceased, the CRA will recalculate the amounts based on the surviving spouse's or common-law partner's updated eligibility. Those payments will only include a claim for the surviving spouse or common-law partner and any children, if applicable.

What if the deceased is an eligible child?

Entitlement to GST/HST credit and CAIP for a deceased child stops the quarter after the child's date of death. You should notify the CRA of the date of death so that the CRA can update their records.

Canada child benefit (CCB) payments received after the date of death

Contact the CRA at 1-800-387-1193 and provide the date of death as soon as possible. If the deceased person was receiving CCB payments (which could include payments from related provincial or territorial child benefit and credit programs) for a child and the surviving spouse or common-law partner is the child's parent, the CRA will usually transfer the CCB payments to that person.

If you received benefit payments for a child and your spouse or common-law partner has died, contact the CRA to provide the date of death. We will recalculate your payments to adjust your revised family net income.

If anyone else, other than the parent, is now primarily responsible for the care and upbringing of the child, that person will have to apply for benefit payments for the child through one of the following options:

If the deceased is an eligible child, entitlement to CCB payments for the deceased child stops the month after the child's date of death. You should notify the CRA of the date of death so that they can update their records.

Clearance certificate

As the legal representative, you may want to get a clearance certificate before you distribute any property under your control. A clearance certificate certifies that all amounts for which the deceased is liable to the CRA have been paid, or that the CRA has accepted security for the payment. If you do not get a clearance certificate and distribute the assets of the estate, you may be personally liable for the amount of tax owed by the deceased, to the extent of the value of the assets distributed. A clearance certificate covers all tax years to the date of death. It is not a clearance for any amounts a trust owes. If there is a trust, a separate clearance certificate is needed for the trust.

To request a certificate, complete Form TX19, Asking for a Clearance Certificate, and send it to your regional tax services office. Do not include Form TX19 with a return. Send it only after you have received the notices of assessment for all the returns filed, and paid or secured all amounts owing. You can find the address of your regional tax services office on Form TX19.

For more information about clearance certificates, call 1-800-959-8281. You can also see Information Circular IC82-6R13, Clearance Certificate.

Getting started

This section lists the steps you may need to follow to prepare the return.

  1. Determine the deceased person's income from all sources. You can do this by:
    • checking previous-year returns to get the names of employers and investment companies the deceased may have received income from in the past
    • checking safety deposit boxes for additional sources of income and benefits
    • contacting payers such as employers, banks, trust companies, stock brokers, and pension plan managers
    • getting information slips from payers (for example, a T4, Statement of Remuneration Paid, from an employer, or a T5, Statement of Investment Income, from a bank or trust company)
    • contacting Service Canada Centre at 1-800-622-6232, if the deceased was receiving Canada Pension Plan benefits or was 65 years or older and in receipt of old age security pension, and you do not have a T4A(P) slip or T4A(OAS) slip

      Even if you cannot get the slips, you still have to report the income from all sources on either the final or the optional returns. Optional returns are explained in Chapter 3. You can also claim any related deductions as outlined in Chart 1. If a slip is not available, ask the payer to give you a note that shows the income and deductions. Attach this note to the return. If you cannot get a note from the payer, estimate the income and deduction amounts. For example, you can use pay stubs to estimate employment income and the amounts deducted for Canada Pension Plan or Quebec Pension Plan contributions, registered pension plan contributions, employment insurance premiums, union dues, and income tax. Attach a note to the return giving the amounts and the payer's name and address. If possible, also attach a photocopy of the pay stubs.
  2. Get the tax package for the province or territory where the deceased lived at the time of death. You will need to file an Income Tax and Benefit Return to report any taxable income and to claim any applicable deductions or credits.
  3. Get any other guides, information circulars, interpretation bulletins, and forms that you may need. See References for a list of forms and publications referred to in this guide.
  4. Complete and file a final return and any optional returns. For information on how to prepare a final return, see Chapter 2. For information on optional returns, see Chapter 3.
  5. You may have to file a T3 Trust Income Tax and Information Return, in addition to a final return. For example, some of the amounts an employer pays may be income for the estate. Estate amounts can appear on T4A slips, T4RSP slips, or in a letter from the issuing institution. See Chart 2.
  6. When you have received the notice of assessment for all required returns, you can apply for a clearance certificate. See Clearance certificate.

Common questions and answers

Here are some common questions and answers you may want to look at before you read this guide.

Q. Can I deduct funeral expenses, probate fees, or fees to administer the estate?

A. No. These are personal expenses and cannot be deducted.

Q. On what return do I report Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) death benefits for the estate of the deceased?

A. The amount of the CPP or QPP death benefit is shown in box 18 of Form T4A(P), Statement of Canada Pension Plan Benefits. Do not report this amount on the final return for the deceased person.

If the CPP or QPP death benefit is payable to a beneficiary in the year it is received by the estate, a T3 slip will be issued in the beneficiary's name and the beneficiary will be required to include the amount on their T1 return. The estate does not have the option to elect to have the benefit taxed in the estate if the estate otherwise has taxable income.

If the CPP or QPP death benefit is not paid or made payable to a beneficiary in the year it is received by the estate, the amount will be included in the estate’s taxable income reported on its T3 Trust Income Tax and Information Return in the year it is received by the estate and the estate will pay tax on that amount.

Where the CPP or QPP death benefit is the only income of the estate and a T3 return is not otherwise required to be filed, the death benefit can be reported directly on the T1 return of the beneficiary.

Unlike a death benefit that an employer may pay to the estate or to a named beneficiary, the CPP or QPP benefit is not eligible for the $10,000 death benefit exemption. You have to report all other CPP or QPP benefits on the deceased's final return. For more information, see line 11400.

Q. Who reports amounts an employer pays for vacation and unused sick leave?

A. Vacation pay is income of the deceased person and can be reported on a return for rights or things. Payment for unused sick leave is considered a death benefit and is income of the estate or beneficiary who receives it. For more information, see Archived Interpretation Bulletin IT508R, Death Benefits.

Q. The deceased had investments in a tax-free savings account (TFSA). Who reports any income earned in the TFSA?

A. When the holder of a deposit or an annuity contract under a TFSA dies, the holder is considered to have received, immediately before death, an amount equal to the fair market value (FMV) of all the property held in the TFSA at the time of death. As a result, no income should be reported by the deceased on the final return or any optional returns. After the holder's death, the annuity contract is no longer considered a TFSA and all earnings after the holder's death are taxable to the beneficiaries in the year they receive this income. For more information, see Guide RC4466, Tax-Free Savings Account (TFSA), Guide for Individuals.

Q. If the deceased person was paying tax by instalments, do I have to continue making those instalment payments?

A. No. The only instalments the CRA requires are those that were due before the date of death but not paid.

Q. Why do I have to return the deceased person's GST/HST credit?

A. Since the payments are an advance on purchases for the current calendar year, you have to return GST/HST credit payments that were paid to the deceased after their death. If the deceased was single and the estate is entitled to the payment, another payment will be issued to the estate. However, the payment that was issued to the deceased person must be returned to the CRA before the CRA reissues the payment to the estate.

Chapter 2 - Final return

This chapter explains how to complete and file the final return. The final return can be filed electronically or on paper. For more information on these filing methods, see "How to file your return" in the Federal Income Tax and Benefit Guide.

On the final return, report all of the deceased's income from January 1 of the year of death, up to and including the date of death. Report income earned after the date of death on a T3 Trust Income Tax and Information Return (T3 return). To find out what income to report on the T3 return, see Chart 2. For more information, see the T4013, T3 Trust Guide.

Tax tip

In addition to the final return, you may be able to file up to three optional returns for the year of death.

Information about the deceased's income sources will help you determine if you can file any of these optional returns. You do not report the same income on both the final and an optional return but you can claim certain credits and deductions on more than one return.

Although you do not have to file any of the optional returns, there may be a tax advantage if you file one or more of them in addition to the final return. You may be able to reduce or eliminate tax that you would otherwise have to pay for the deceased.

For more information, see Chapter 3 - Optional returns, and Chart 1.

Due date for the final return

This section discusses when a return is due. For information about when a balance owing is due, see Due date for a balance owing.

Generally, both the final return of the deceased and the return for their surviving spouse or common-law partner who was living with them are due on or before the following dates, if neither person was carrying on a business in 2023:

Chart indicating the due date for the final return based on the date of death:
Period when death occurred Due date for the final return
January 1 to October 31 of the year April 30 of the following year
November 1 to December 31 of the year  6 months after the date of death

If the deceased or the deceased’s spouse or common‑law partner was carrying on a business in 2023 (unless the expenditures made in the course of carrying on the business were mainly the cost or capital cost of tax shelter investments), the following due dates apply to both individuals:

Chart indicating the due date for the final return based on the date of death: Table 2
Period when death occurred Due date for the final return if a business is being carried on
January 1 to December 15 of the year June 15 of the following year
December 16 to December 31 of the year 6 months after the date of death

Tax tip

Previous-year return – If a person dies early in 2024, on or before the filing due date for their 2023 return, and they have not filed that return, the due date for filing it and paying any balance owing is 6 months after the date of death. In that case, the due date for filing the 2023 T1 return of a surviving spouse or common-law partner who was living with the deceased is the same as the due date for the deceased’s 2023 return. However, any balance owing on the surviving spouse’s or common-law partner’s 2023 return must still be paid on or before April 30, 2024, to avoid interest charges.

In that situation, the legal representative may choose to file the final return in 2024. The return generally will be processed in that year, using tax legislation applicable to the 2023 tax year. The legal representative then can request a reassessment of the return in the following year (2025) to apply any tax changes introduced for the 2024 tax year.

Notes

For other previous-year returns that are already due but were not filed by the deceased, the due dates for filing those returns, as well as payment of any related taxes owing, remain the same.

When a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, the return is considered on time if the CRA receives it or if it is postmarked on or before the next business day.

The deceased's will or a court order may set up a testamentary spousal or common-law partner trust. When testamentary debts of the deceased or the estate are being handled through the trust, the due date for the final return is extended to 18 months after the date of death. However, you have to pay any taxes owing on the final return by the due date shown in Due date for a balance owing.

Penalties and interest

If you file the final return late and there is a balance owing, the CRA will charge a late-filing penalty. The penalty is 5% of any balance owing, plus 1% of the balance owing for each full month that the return is late, to a maximum of 12 months. The late-filing penalty may be higher if the CRA charged a late-filing penalty on a return for any of the three previous years. The CRA will also charge you interest on both the balance owing and any penalty.

Tax tip

Even if you cannot pay the full amount owing by the due date, you can avoid this penalty by filing the return on time.

In certain situations, the CRA may cancel this penalty and interest if you file the return late because of circumstances beyond your control. If this happens, complete Form RC4288, Request for Taxpayer Relief - Cancel or Waive Penalties and Interest, or include a letter with the return explaining why you filed the return late. For more information, go to Taxpayer relief provisions or see Information Circular IC07-1R1, Taxpayer Relief Provisions.

Due date for a balance owing

The due date for a balance owing on a final return depends on the date of death.

Chart indicating the due date for a balance owing on a final return:
Period when death occurred Due date for the amount owing
January 1 to October 31 of the year April 30 of the following year
November 1 to December 31 of the year 6 months after the date of death

Note

No matter when the person died, any balance owing on the surviving spouse’s or common-law partner’s 2023 return still has to be paid on or before April 30, 2024, to avoid interest charges.

If you do not pay the amount in full, the CRA will charge compound daily interest on the unpaid amount from the day after the due date of the amount to the date you pay the amount owing.

In some cases, you can make an election to delay paying part of the amount due. For instance, you can delay paying part of the amount owing from rights or things and tax owing on the deemed disposition of capital property.

How to complete the final return

The following steps explain the most common lines on a deceased person's return. For more information on these and other lines on a return, see Federal income tax and benefit information.

Step 1 – Identification and other information

In this area of the return:

Step 2 – Total income

Report amounts that are paid regularly, even if the person did not receive them before they died. Some examples of these amounts are salary, interest, rent, royalties, and most annuities. These amounts usually accumulate in equal daily amounts for the time they are payable. For more information, see Archived Interpretation Bulletin IT-210R2, Income of Deceased Persons - Periodic Payments and Investment Tax Credit.

There are two types of amounts that do not accumulate in equal daily amounts:

For more information about amounts receivable on or before the date of death, see 1. Return for rights or things.

Foreign income

If the deceased earned foreign income at any time in 2023, see "Report foreign income and other foreign amounts" in the Federal income tax and benefit information for 2023.

Amounts an employer pays to the deceased person's estate

There may be amounts that an employer will pay to a deceased employee's estate. For these amounts, an employer will usually complete a T4 or T4A slip.

Some of the amounts an employer pays will be part of the deceased's employment income for the year of death. Report these amounts on the final return. The amounts are employment income for the year of death even if they are received in a year after the year of death. Box 14 of the T4 slip should include the following amounts:

The employer may change any of these amounts later because of an agreement or promotion. If the document that allows the change was signed before the date of death, report these additional amounts on the final return. However, if the document was signed after the date of death, the additional amounts are not taxable. See Chart 3.

Some of these amounts may be rights or things, and you may be able to report them on an optional return. For more information, see 1. Return for rights or things. Some of the amounts an employer pays are income for the estate and should be reported on a T3 Trust Income Tax and Information Return. See Chart 2.

Lines 10100 to 10400 - Employment income

Enter all salary, wages, or commissions received from January 1 to the date of death. Also include amounts that accumulate from the start of the pay period in which the employee died to the date of death.

To determine how to report commission income and claim expenses for a self-employed salesperson, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Line 11300 - Old age security pension

Enter the amounts from box 18 of the deceased's T4A(OAS) slip. A payment received after the date of death for the month in which the individual died may be reported on the final return or on a rights or things return.

Do not enter on line 11300 the amount in box 21 of the T4A(OAS) slip. Enter this amount on Line 14600 - Net federal supplements. You may be able to claim a deduction for this amount on Line 25000 - Other payments deduction.

Note

If the deceased's net income before adjustments (line 23400), minus the amounts entered on lines 11700 and 12500, plus the amount deducted on line 21300 and/or any repayment of registered disability savings plans income on line 23200, is more than $86,912, all or part of the old age security benefits (OAS) may have to be repaid. To calculate the deceased’s OAS repayment, complete the chart  on the back of the T4E slip of the deceased.

Line 11400 - CPP or QPP benefits

Enter the total Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits in box 20 of the deceased's T4A(P) slip, minus any amount in box 18. The amount in box 20 is the total of the amounts in boxes 14 to 19. A payment received after the date of death for the month in which the individual died may be reported on the final return or on a rights or things return.

If the deceased received a lump-sum CPP or QPP benefit, or a CPP or QPP disability benefit, see line 11400.

Do not include a CPP or QPP death benefit shown in box 18 on the final return. This amount will be included in the income of the estate and reported on a T3 Trust Income Tax and Information Return for the year in which the amount was received by the estate. However, if the CPP death benefit is payable to a beneficiary of the estate in the year that it was received by the estate, the estate is entitled to deduct the amount from its income. In this case a T3 slip will be issued in the beneficiary’s name and the beneficiary will be required to include the amount on line 13000 of their T1 return. The estate does not have the option to elect to have the benefit taxed in the estate if the estate otherwise has taxable income.

Where the CPP or QPP death benefit is the only income of the estate and a T3 return is not otherwise required to be filed, the death benefit can be entered directly on line 13000 of the T1 return of the beneficiary.

A CPP or QPP death benefit will generally not be taxable where the recipient deals at arm's length with the estate (is not the beneficiary of the estate) and all of the following apply:

Line 11500 - Other pensions or superannuation

Enter any other pensions or superannuation the deceased received from January 1 to the date of death, such as amounts shown in box 016 on T4A slips and box 31 on T3 slips. If there is a lump-sum amount shown in box 018 of the T4A slip or box 22 of the T3 slip, enter it on line 13000.

If the deceased received annuity or registered retirement income fund (RRIF) payments, including life income fund (LIF) payments, for the period from January 1 to the date of death, report that income on the final return.

If the deceased was 65 or older, enter the RRIF income (other than amounts in box 18) on line 11500. Regardless of age, enter the RRIF income (other than amounts in box 18 of the T4RIF slip) on line 11500 if the deceased received the RRIF payments because their spouse or common-law partner died. In all other cases, enter the RRIF income on line 13000 of the return. For more information, see Income from a registered retirement income fund (RRIF).

If the deceased person jointly elected with their spouse or common-law partner to split the pension, annuity, and RRIF (including LIF) payments that were entered on line 11500 by the pensioner, the elected split-pension amount transferred from the pensioner to the pension transferee can be deducted on line 21000. For more information, see Line 21000 - Deduction for elected split-pension amount.

Line 11600 - Elected split-pension amount

To make this election, the deceased and their spouse or common-law partner must have jointly elected to split pension income by completing Form T1032, Joint Election to Split Pension Income. The elected split-pension amount from line 22 of Form T1032 must be entered on line 11600 of the receiving spouse or common-law partner's return.

Form T1032 must be filed by the filing due date for the 2023 return (see Due date for the final return). This form must be attached to the paper return of both the deceased and their spouse or common-law partner. The information provided on both forms must be the same.

Both the deceased person and their spouse or common-law partner must have signed Form T1032. If the form is being completed after the date of death, the surviving spouse or common-law partner and the legal representative of the deceased person's estate must sign the form. In some cases, the legal representative may be the spouse or common-law partner, in which case this person must sign for the deceased person too.

Line 11900 - Employment insurance benefits

Enter any employment insurance (EI) benefits the deceased received from January 1 to the date of death (box 14 of the T4E slip).

If the deceased's net income before adjustments (line 23400), minus the amounts entered on lines 11700 and 12500, plus the amount deducted on line 21300 and/or any repayment of registered disability savings plans income (line 23200), is more than $76,875, part of these benefits may have to be repaid.

If the deceased repaid any EI benefits to Service Canada, they may be entitled to a deduction. For more information, see line 23200 in the Federal Income Tax and Benefit Guide.

Line 11905 - Employment insurance maternity and parental benefits and provincial parental insurance plan benefits

Enter on this line the total of the following amounts:

These amounts are already included on line 11900 of the return for the deceased, so do not add them again when you calculate the total income on line 15000 of the deceased's return. 

Lines 12000 and 12100 - Investment income

Report all investment income the deceased received from January 1 to the date of death. This type of income includes dividends (line 12000) and interest (line 12100).

Also include the following:

You can report some types of investment income as rights or things. For details, see 1. Return for rights or things. Report interest that accumulates after the date of death on a T3 Trust Income Tax and Information Return.

Line 12500 - Registered disability savings plan (RDSP) income

If the beneficiary of an RDSP dies, the RDSP must be closed no later than December 31 of the year following the year of the beneficiary's death. Any funds remaining in the RDSP, after any required repayment of government bonds and grants, will be paid to the estate. If a disability assistance payment (DAP) had been made and the beneficiary is deceased, the taxable portion of the DAP must be included in the income of the beneficiary's estate in the year the payment is made.

Line 12700 - Taxable capital gains

For information about this type of income, see Chapter 4.

Line 12900 - RRSP income

At the time of death, a person may have a registered retirement savings plan (RRSP). The RRSP may or may not have matured. Depending on the situation, the amount you include in the deceased's income can vary.

If the deceased person jointly elected with their spouse or common-law partner to split RRSP annuity payments that the pensioner received up until the date of death and entered on line 12900, the elected split-pension amount can be deducted on line 21000. For more information, see Line 21000 - Deduction for elected split-pension amount.

Payments from a matured RRSP

A matured RRSP is one that is paying retirement income, usually in monthly payments. Enter on line 12900 the RRSP payments the deceased received from January 1 to the date of death.

If the annuitant's spouse or common-law partner is designated as a beneficiary of the RRSP, in the RRSP contract or the will, they will begin receiving the remaining annuity payments from the plan. The surviving spouse or common-law partner has to enter the remaining payments as income on their return.

If the surviving spouse or common-law partner is the beneficiary of the estate, that person and the legal representative can jointly elect, in writing, to treat the amounts the RRSP paid to the estate as being paid to the spouse or common-law partner. Attach a copy of the written election to the return of the surviving spouse or common-law partner. The election has to specify that this person is electing to become the annuitant of the RRSP.

If the amounts from the RRSP are paid to a beneficiary other than the deceased's spouse or common-law partner, enter the amount from box 34 of the T4RSP slip on line 12900 of the deceased's return. For more information, see Information Sheet RC4177, Death of an RRSP Annuitant, and Guide T4040, RRSPs and Other Registered Plans for Retirement.

Payments from an unmatured RRSP

Generally, an unmatured RRSP is one that does not yet pay retirement income.

Generally, the CRA considers a deceased annuitant to have received, immediately before death, an amount equal to the fair market value (FMV) of all the property of the unmatured plan at the time of death. The FMV of the property is shown in box 34 of the T4RSP slip issued to the deceased annuitant. You have to include this amount in the deceased's income for the year of death.

If a T4RSP slip showing the FMV of the plan at the time of death is issued in the deceased's name, you may be able to reduce the amount you include in the deceased's income. For details, see Information Sheet RC4177, Death of an RRSP Annuitant, and Guide T4040, RRSPs and Other Registered Plans for Retirement.

If all of the property held in the RRSP is to be paid to the surviving spouse or common-law partner, and that payment is directly transferred to their RRSP, RRIF, pooled registered pension plan (PRPP), specified pension plan (SPP), or to an issuer to buy the surviving spouse or common-law partner an eligible annuity (as specified in the RRSP contract or the will) before the end of the year following the year of death, a T4RSP slip will not be issued in the deceased's name. In this case, the surviving spouse or common-law partner has to report the payment on their return and claim a deduction equal to the amount transferred.

Sometimes there is an increase in the value of an RRSP between the date of death and the date of final distribution to the beneficiary or estate. This amount has to be included in the income of the beneficiary or the estate for the year it is received. A T4RSP slip will be issued for this amount. For more information, see Chart 6 - Amounts from a deceased annuitant's RRSP, in Chapter 5 of Guide T4040, RRSPs and Other Registered Plans for Retirement.

Sometimes, the FMV of the property of an unmatured RRSP decreases between the date of death and the date of final distribution to the beneficiary or the estate. If the total of all distributions from the RRSP is less than the FMV of the property that was included in the deceased annuitant's income for the year of death, the deceased's legal representative can request that the difference be deducted on the deceased's final return. Generally, for the deduction to be allowed, the final distribution must occur by the end of the year that follows the year of death. For more information, see Information Sheet RC4177, Death of an RRSP Annuitant.

If the amounts from the RRSP are paid to a beneficiary other than the deceased's spouse or common-law partner, see Guide T4040, RRSPs and Other Registered Plans for Retirement.

Rollover of RRSP proceeds to a registered disability savings plan (RDSP)

The existing RRSP rollover rules discussed in the previous section are extended to allow a specified RDSP payment from the deceased person's RRSP to the RDSP of an eligible individual.

An eligible individual is a child or grandchild of a deceased annuitant under an RRSP or a RRIF, or of a deceased member of a registered pension plan (RPP), PRPP, or SPP who was financially dependent on the deceased for support at the time of the deceased's death, because of an impairment in physical or mental function.

A specified RDSP payment is a payment that meets all of the following conditions:

For more information, go to Registered disability savings plan (RDSP) or see Information Sheet RC4177, Death of an RRSP Annuitant.

Home Buyers' Plan (HBP)

The deceased may have participated in the HBP. If so, the deceased would have made a withdrawal from their RRSP and may have been making repayments to their RRSP, PRPP, or SPP. In this case, include on line 12900 the total of all amounts that remain to be repaid at the time of death. The amount of any RRSP, PRPP, SPP, or contributions that the deceased made to their individual plans in the year of their death can be designated as a repayment.

However, you do not have to report these amounts when the legal representative and the surviving spouse or common-law partner jointly elect to have the surviving spouse or common-law partner continue to make the repayments. For more information, see The Home Buyers' Plan.

Lifelong Learning Plan (LLP)

The deceased may have participated in the LLP. If so, the deceased would have made a withdrawal from their RRSP and may have been making repayments to their RRSP, PRPP, or SPP. Treatment of these amounts is the same as with the Home Buyers' Plan, and a similar election is available. For more information, see Guide RC4112, Lifelong Learning Plan (LLP).

Line 13000 - Other income

Use this line to report taxable income not reported anywhere else on the return. Identify the type of income you are reporting in the space to the left of line 13000. Some of the types of income you report on this line are discussed in the following sections. For more information, see line 13000.

Death benefits (other than Canada or Quebec Pension Plan death benefits)

A death benefit is an amount received after a person's death for that person's employment service. It is shown in box 106 of the T4A slip or box 26 of the T3 slip. A death benefit payable in respect of the deceased person is not reported on the final return for the deceased; rather, it is income of the estate or the beneficiary that receives it. Up to $10,000 of the total of all death benefits paid may not be taxable. If the beneficiary received the death benefit, see line 13000 or Archived Interpretation Bulletin IT-508R-Death Benefits. If the estate received the death benefit, see Guide T4013, T3 Trust Guide.

Income from a registered retirement income fund (RRIF)

When a person dies, they may have a RRIF. Depending on the situation, the amount you include in the deceased's income can vary.

If the deceased received payments from a RRIF for the period from January 1 to the date of death, report that income on the final return. If the deceased was 65 or older, or if the deceased was under 65 and received the RRIF payments due to the death of their spouse or common-law partner, see Line 11500 - Other pensions or superannuation. In all other cases, enter the RRIF income on line 13000.

If the annuitant made a written election in the RRIF contract or in the will to have the RRIF payments continue to be paid to their spouse or common-law partner after death, that person becomes the annuitant and will start to get the RRIF payments as the new annuitant.

If the annuitant did not elect in writing to have the RRIF payments continue to be paid to their spouse or common-law partner, that person can still become the annuitant of the RRIF after the annuitant's death. This is the case if the legal representative consents to the deceased's spouse or common-law partner becoming the annuitant, and the RRIF carrier agrees to continue the payments under the deceased annuitant's RRIF to the surviving spouse or common-law partner.

A T4RIF slip will not be issued in the deceased annuitant's name for the fair market value (FMV) of the property at the time of death if all of the following conditions are met:

In this case, the surviving spouse or common-law partner will receive a T4RIF slip, has to report the payment on their return, and is eligible to claim a deduction equal to the amount directly transferred.

For all other situations, the CRA considers that the deceased received, immediately before death, an amount equal to the FMV of the plan at the time of death. The FMV of the property is shown in box 18 of the T4RIF slip issued in the deceased's name. Include this amount in the deceased's income for the year of death. However, you may be able to reduce the amount you include in income. For more information, see Information Sheet RC4178, Death of a RRIF Annuitant, PRPP Member or ALDA Annuitant,  and Guide T4040, RRSPs and Other Registered Plans for Retirement.

Sometimes there is an increase in the value of a RRIF between the date of death and the date of final distribution to the beneficiary or estate. Generally, this amount has to be included in the income of the beneficiary or the estate for the year it is received. A T4RIF slip will be issued for this amount. For more information, see Chart 7 - Amounts from a deceased annuitant's RRIF, in Chapter 5 of Guide T4040, RRSPs and Other Registered Plans for Retirement.

Sometimes, the FMV of the property of a RRIF decreases between the date of death and the date of final distribution to the beneficiary or the estate. If the total of all distributions from the RRIF is less than the FMV of the property that was included in the deceased annuitant's income for the year of death, the deceased's legal representative can request that the difference be deducted on the deceased's final return. Generally, for the deduction to be allowed, the final distribution must occur by the end of the year that follows the year of death. For more information, see Information Sheet RC4178, Death of a RRIF Annuitant, PRPP Member, or ALDA Annuitant.

Rollover of RRIF proceeds to a registered disability savings plan (RDSP)

The existing RRIF rollover rules discussed in the previous section allow a specified RDSP payment from the deceased person's RRIF to the RDSP of an eligible individual.

An eligible individual is a child or grandchild of a deceased annuitant under an RRSP or a RRIF, or of a deceased member of an RPP, an SPP, or a PRPP, who was financially dependent on the deceased for support at the time of the deceased's death, because of an impairment in physical or mental function.

Rollovers from other plans

The existing RRIF rollover rules discussed in the previous section allow a specified RDSP payment from the deceased person’s RPPs, PRPPs, and SPPs to the RDSP of an eligible individual.

A specified RDSP payment is a payment that meets all of the following conditions:

For more information on this topic, go to What is a registered disability savings plan (RDSP) or see Information Sheet RC4178, Death of a RRIF Annuitant, PRPP Member, or ALDA Annuitant.

Lines 13499 to 14300 - Self-employment income

If the deceased had self-employment income, enter the gross and net income or loss on the appropriate line. For more information, see lines 13499 to 14300.

Reserves in the year of death

Sometimes, when a property is sold, some of the proceeds are not payable until after the year of sale.

Generally, a person can deduct from income a portion of the gross profit or gain that is not payable until a later year. This is called a reserve.

For example, where goods are sold and the terms of the sale provide that at least part of the amount owing is not due for more than two years from the day on which the property was sold, a reasonable reserve may be claimed. For more information, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing income and Interpretation Bulletin IT-154, Special reserves.

The other types of reserves that may be available include:

In most cases, you cannot deduct a reserve of the year of death. However, where, as a consequence of the death of the taxpayer, their right to receive the outstanding amounts has been transferred to a spouse or common-law partner, or spousal or common-law partner trust, the legal representative and the beneficiary can choose to claim a reserve on the deceased’s return. To do this, complete Form T2069, Election in Respect of Amounts Not Deductible as Reserves for the Year of Death, and attach a copy to the deceased's return.

This choice is available only if the deceased was a resident of Canada immediately before death. For a transfer to a spouse or common-law partner, that person also has to have been a resident of Canada immediately before the deceased's death. For a transfer to a spousal or common-law partner trust, the trust has to be resident in Canada immediately after the proceeds or income become locked-in for the trust.

Spouse or common-law partner, or spousal or common-law partner trust

Any amount claimed as a reserve in the deceased’s final return must be included in the income of the spouse or common-law partner, or spousal or common-law partner trust (herein referred to as spouse or spousal trust) in the year of death. A reserve for amounts receivable on property sold in the course of a business (paragraph 20(1)(n)) may be claimed by the spouse or spousal trust as if the property was disposed of by the spouse or spousal trust at the time it was disposed of by the deceased.

The spouse or common-law partner, or spousal or common-law partner trust includes in income an amount equal to the reserve that is on Form T2069. This income has to be included on the return for the first tax year after death. You have to attach a copy of Form T2069 to that return.

Lines 14400 to 14600 - Other types of income

Enter the deceased's workers' compensation benefits, social assistance payments, and net federal supplements on the appropriate lines. For more information on social assistance payments, see line 14500.

Step 3 – Net income

Enter the amounts and claim the deductions that apply to the deceased on lines 20600 to 23500, using their information slips along with the instructions provided on the return and on any applicable worksheet, schedule, or form. In this section of the guide, you will find information that you might need in addition to the instructions on the return.

This section does not provide supplementary information for lines 20810, 21300, 21500, 21700, 21900, 22000, 22300, 22400, 23100, and 23500, as the instructions on the return or in other information products provide the information you need.

Line 20600 – Pension adjustment

If the deceased lived in Canada and participated in a pension plan in 2023, you may have to enter an amount on this line.

If the deceased participated in an eligible foreign employer‑sponsored pension plan or in an eligible foreign social security arrangement (other than a United States (U.S.) arrangement), complete Form RC269, Employee Contributions to a Foreign Pension Plan or Social Security Arrangement for Non-United States Plans or Arrangements (if applicable).

If the deceased was temporarily working in Canada and continued to participate in a qualifying retirement plan offered by their employer in the U.S., complete Form RC267, Employee Contributions to a United States Retirement Plan for Temporary Assignments (if applicable).

If the deceased was a Canadian resident who travelled to work in the U.S. and participated in their employer’s qualifying retirement plan in the U.S., complete Form RC268, Employee Contributions to a United States Retirement Plan for Cross-Border Commuters (if applicable).

Line 20700 – Registered pension plan (RPP) deduction

Generally, you can deduct the total of all amounts shown in box 20 of the deceased’s T4 slips, in box 032 of their T4A slips, and on their union or RPP receipts. See Guide T4040, RRSPs and Other Registered Plans for Retirement, to find out how much you can deduct if any of the following apply:

Note

If the deceased made contributions to a pension plan in a foreign country, you may be able to deduct the contributions. To find out how much you can deduct, see the forms listed under line 20600.

Line 20800 - RRSP deduction

Use this line  to deduct contributions the deceased made before their death to their own registered retirement savings plan (RRSP ), specified pension plan (SPP), or pooled registered pension plan (PRPP), and to the deceased’s spouse or common‑law partner’s RRSPs, or SPPs, but do not include repayments under a Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP).

SPP contributions generally have the same rules as RRSP contributions. A PRPP is a retirement savings option for individuals, including those who are self-employed, who do not have access to a workplace pension plan. For more information, go to The Pooled Registered Pension Plan (PRPP) or see Guide T4040, RRSPs and Other Registered Plans for Retirement.

After a person dies, no one can contribute to the deceased person’s RRSPs , PRPPs, or SPPs. However, the deceased individual’s legal representative can make contributions to the surviving spouse’s or common‑law partner’s RRSPs or SPPs in the year of death or during the first 60 days after the end of that year.

The amount you can deduct on the deceased’s return for 2023 is usually based on the deceased’s 2023 RRSP deduction limit. You can also deduct amounts for contributions the deceased made for certain amounts the deceased received and transferred to an RRSP, RPP, or PRPP.

For more information, see Guide T4040, RRSPs and Other Registered Plans for Retirement.

NEW!Line 20805 - FHSA deduction

The first home savings account (FHSA) is a new registered plan to help individuals save for their first home. Contributions to an FHSA are generally deductible and qualifying withdrawals made from an FHSA to purchase a qualifying home are tax-free.

If the deceased person opened one or more FHSAs in 2023, complete Schedule 15, FHSA Contributions, Transfers and Activities, to calculate the deceased person’s FHSA deduction and enter the result on line 20805 of the deceased person’s return.

For more information about FHSAs and what happens when the FHSA holder dies, go to First Home Savings Account (FHSA)

Line 21000 - Deduction for elected split-pension amount

If the deceased person jointly elected with their spouse or common-law partner to split pension income by completing Form T1032, Joint Election to Split Pension Income, the transferring spouse or common-law partner can deduct on this line, the elected split-pension amount from line 16 of that form.

Form T1032 must be filed by the filing due date for the 2023 return (see Due date for the final return). This form must be attached to the paper return of both the deceased and their spouse or common-law partner.

Both the deceased person and their spouse or common-law partner must have signed the Form T1032. If the form is being completed after the date of death, the surviving spouse or common-law partner and the legal representative of the deceased person's estate must sign the form. In some cases, the legal representative may be the spouse or common-law partner in which case this person must sign for the deceased person too.

Line 21200 – Annual union, professional, or like dues

Claim the total of the following amounts related to employment that the deceased paid (or that was paid for the deceased and reported as income) in the year:

For more information, see archived interpretation bulletins IT-103R, Dues Paid to a Union or to a Parity or Advisory Committee, and archived IT-158R2, Employees’ Professional Membership Dues.

Line 21400 – Child care expenses

Use this line to deduct amounts the deceased or their spouse or common-law partner paid to have someone look after their child so that they could earn employment or self-employment income, go to school, or do research. The expenses are deductible only if the child was under 16 years of age or had an impairment in physical or mental functions at some time in 2023.

For more information, see Form T778, Child Care Expenses Deduction.

Line 22100 – Carrying charges and interest expenses

For information on carrying charges and interest expenses that the deceased may have paid to earn income from investments, see line 22100.

Line 22215 - Deduction for CPP or QPP enhanced contributions on employment income

Use this line to deduct the enhanced contributions on CPP and QPP pensionable earnings the deceased contributed through their employment income.

Whether the deceased contributed to the CPP or QPP, the maximum allowable claim is $631.

For more information, see Schedule 8 or Form RC381, whichever applies.

Line 23200 – Other deductions

Claim the allowable amounts not deducted anywhere else on the return. Specify the deduction you are claiming in the space provided on the return.

If the deceased repaid federal, provincial or territorial COVID‑19 benefits in 2023, the amount can be claimed as a deduction on line 23200 of their 2023 return.

For more information, see line 23200.

Step 4 – Taxable income

Line 25300 - Net capital losses of other years

For information about these losses, see Chapter 5.

Other deductions

For information on other deductions the deceased may be entitled to claim, see the following publications:

Step 5 – Federal tax 

Personal amounts (lines 30000 to 30450 and 30500 of the final return)

If the deceased was a resident of Canada from January 1 to the date of death, claim the full personal amounts.

If the deceased was a resident of Canada for part of the time from January 1 to the date of death, you may have to prorate the personal amounts. To do so, multiply the personal amount by the number of days the deceased lived in Canada and divide the result by the number of days in the year. The result is the amount you can claim on the deceased's return. If the deceased immigrated to Canada in the year of death, see Pamphlet T4055, Newcomers to Canada. If the deceased emigrated from Canada in the year of death, see Leaving Canada (emigrants).

The credits referred to in this section are federal credits, which are claimed on the deceased's return. If the deceased was a resident of a province or territory other than Quebec, use the appropriate form included in the income tax package to calculate their provincial or territorial tax credits.

Line 30000 - Basic personal amount

See line 30000 on the return to calculate the basic personal amount for the year.

Line 30100 - Age amount

If the deceased was 65 or older, and their net income is less than $98,309, you can claim all or part of the age amount. The amount you can claim will depend on the deceased's net income for the year. See line 30100 of the Federal Worksheet.

Line 30300 - Spouse or common-law partner amount

If the net income of the spouse or common-law partner is less than the basic personal amount for the deceased (or the basic personal amount plus $2,499, if the spouse or common-law partner was dependent on the deceased because of an impairment in physical or mental functions - see line 30300), you may be able to claim all or part of this amount. Use the net income of the spouse or common law partner for the whole year, not just up to the deceased’s date of death.

Line 30400 - Amount for an eligible dependant

If the deceased is entitled to claim this amount, use the dependant's net income for the whole year, not just up to the deceased's date of death. Calculate the amount for line 30400 on Schedule 5, and enter it on the deceased's return.

For more information, see line 30400. Schedule 5 is included in the income tax package.

Line 30425 – Canada caregiver amount for spouse or common-law partner, or eligible dependant age 18 or older

You may be able to claim this amount if the deceased cared for their spouse or common-law partner or an eligible dependant 18 years of age or older. Calculate the amount for line 30425 on Schedule 5, and enter it on the deceased's return. Schedule 5 is included in the income tax package. For more information, see Guide RC4064, Disability-Related Information.

Line 30450 - Canada  caregiver amount for other infirm dependants age 18 or older 

If the deceased is entitled to claim this amount, use the dependant’s net income for the whole year, not just up to the deceased’s date of death. Calculate the amount for line 30450 on Schedule 5 and enter it on the deceased's return. Schedule 5 is included in the income tax package. 

Lines 30499 and 30500 – Canada caregiver amount for infirm children under 18 years of age

You can claim an amount for the deceased for each of the deceased’s or the deceased’s spouse’s or common-law partner’s children who meets all of the following conditions:

There are also certain situations where you can claim this amount for the deceased, even if the child did not live throughout the year with the deceased and the deceased’s spouse or common-law partner.

For more information, go to Line 30500 – Canada caregiver amount for infirm children under 18 years of age.

Line 30800 - CPP or QPP contributions through employment

There are limits on how much can be claimed for the deceased’s contributions to the CPP, QPP, or both. These limits depend in part on whether the deceased was a resident of Quebec or another province or territory on the date of death.

Generally, if the deceased contributed less than the maximum, you can contribute for them, 10.9% on any part of the income on which they have not already made contributions. To calculate and make additional CPP contributions for 2023, complete Form CPT20, Election to Pay Canada Pension Plan Contributions, and Schedule 8 or Form RC381, whichever applies. Form CPT20 lists the eligible employment income where additional CPP contributions can be made.

For more information, see line 30800 in the Federal Income Tax and Benefit Guide.

Line 31260 - Canada employment amount

Employees are eligible to claim whichever of the following amounts is less:

Line 31270 – Home Buyers’ amount

You can claim up to $10,000 for the deceased if they purchased a qualifying home in the year and both of the following apply:

For more information, go to line 31270.

Line 31285 - Home accessibility expenses

If the deceased was a qualifying individual or an eligible individual making a claim for a qualifying individual, you may be able to claim up to $20,000 on the deceased’s final return for eligible expenses incurred for renovations to an eligible dwelling to make it more accessible.

A qualifying individual is an individual who is eligible for the disability tax credit at any time in a tax year, or an individual who is 65 years of age or older at the end of a tax year. If an individual died in 2023 prior to turning 65 but would have turned 65 during 2023 had they been alive, the individual is considered to be a qualifying individual.

For more information, see the Federal Worksheet, or go to line 31285.

Line 31350 - Digital news subscription expenses

You can claim for the deceased up to $500 for amounts paid in 2023 for qualifying subscription expenses.

A qualifying subscription expense is the amount a subscriber paid in the year for a digital news subscription with a qualified Canadian journalism organization (QCJO) that does not hold a licence to carry on a broadcasting undertaking. To qualify, a digital news subscription must give access to digital content that is primarily written news.

For more information, see line 31350.

Line 31400 - Pension income amount

The deceased may have received eligible pension or annuity income before the date of death. If this is the case, you may be able to claim the pension income amount of up to $2,000. Complete the chart for line 31400 on the Federal Worksheet included in the income tax package.

If the deceased and their spouse or common-law partner elected to split pension income, follow the instructions at Step 4 on Form T1032, Joint Election to Split Pension Income, to calculate the amount to enter on line 31400.

Line 31600 - Disability amount (for self)

You can claim a disability amount if the deceased met certain conditions. For more information about these conditions, see Guide RC4064, Disability-Related Information.

Tax tip

If the deceased or anyone else paid for certain eligible expenses, such as an attendant or for care in a nursing home or other establishment because of the deceased's impairment, it may be more beneficial to claim the amounts paid as medical expenses instead of the disability amount. In some circumstances, both amounts can be claimed.

For more information, see "Attendant care and care in a facility" in Guide RC4065, Medical Expenses, and Income Tax Folio S1-F1-C1, Medical Expense Tax Credit.

Line 31800 - Disability amount transferred from a dependant

If the deceased had a dependant who is eligible for the disability tax credit, you may be able to claim all or a part of the dependant's disability amount. For more information, see line 31800, and complete the chart for line 31800 on the Federal Worksheet included in the income tax package.

Line 31900 - Interest paid on your student loans

You may be able to claim an amount for interest paid in 2022 or the preceding five years on loans made to the deceased under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act, or similar provincial or territorial government laws for post-secondary education. Enter the total amount shown on the receipts. Attach the receipts to the final return. For more information, see Guide P105, Students and Income Tax.

Line 32300 – Your tuition, education, and textbook amounts

Complete Schedule 11 to calculate the total eligible tuition, education, and textbook amounts for the deceased. Enter the amount you are claiming on line 32300.

For more information, read Guide P105, Students and Income Tax.

Line 32600 - Amounts transferred from your spouse or common-law partner

Sometimes there are amounts that the deceased's spouse or common-law partner does not need to reduce their federal income tax to zero. In these situations, you can transfer the remaining amounts to the deceased's final return.

Also, the deceased may have amounts that are not needed to reduce their federal tax to zero. If this is the case, you can transfer the remaining amounts to the return of the spouse or common-law partner. However, before you can do this, you have to reduce the federal tax to zero on the final return you file for the deceased.

For either situation, you can transfer the following amounts if the person transferring the credit meets all of the following requirements for the credit:

If you do transfer any of these amounts, complete Schedule 2, Federal Amounts Transferred from your Spouse or Common-law Partner, and attach it to the final return for the deceased.

Line 33099 - Medical expenses for self, spouse or common-law partner, and your dependent children under 18 years of age

You can claim medical expenses for the deceased that are more than whichever of the following amounts is less:

The medical expenses paid on behalf of the deceased can be for any 24-month period that includes the date of death, as long as no one has claimed them on any other return or for any other year. This also applies if you are claiming expenses the deceased paid for a dependant (other than a dependent child under 18 years of age) who died in the year, which would be claimed on line 33199 of the deceased’s return.

Attach the receipts for medical expenses to the return.

Note

You may be able to claim a credit of up to $1,399 if you have an amount on line 21500, "Disability supports deduction," or line 33200, the allowable portion of medical expenses. For details, see line 45200, "Refundable medical expense supplement," on the Federal Worksheet.

For more information on medical expenses, see line 33099.

Line 34900 - Donations and gifts

Use this line to claim charitable donations the deceased, or their spouse or common-law partner, made before the date of death and complete Schedule 9 - Donations and Gifts.

Support the claims for donations and gifts with official donation receipts that the registered charity or other qualified donee has issued, showing either the deceased's name, or the deceased's spouse's or common-law partner's name.

Estate donations (donations made by will and designation donations) are deemed to be made by the individual’s estate and where certain conditions are met, by the individual’s graduated rate estate (GRE).

GRE donations are donations by a GRE to a qualified donee. The donated property must be property that was acquired by the estate on and as a consequence of the death (or property that was substituted for such property). GRE donations include those made through the will and designation donations.

A designation donation is a donation of a direct distribution of proceeds to a qualified donee from an RRSP (including a group RRSP), RRIF, a tax-free savings account (TFSA), or a life insurance policy (including a group life insurance policy) as a result of a beneficiary designation. The above does not apply if the qualified donee is the policyholder or an assignee of the deceased person’s interest in the policy.

You can allocate a GRE donation among any of the following:

In addition, a gift made after the 36-month period but within 60 months after the date of death by a former GRE that continues to meet all of the requirements of a GRE except for the 36-month time limit, can be allocated among any of the following:

An estate, whether it is a GRE or not, can claim a charitable donations tax credit for an estate donation in the year in which the donation is made or in any of the 5 following years (or 10 years for a gift of certified ecologically sensitive land made after February 10, 2014).

As the legal representative, you must attach supporting documentation for the donations made. The type of supporting documentation you have to provide depends on when the registered charity or other qualified donee will receive the gift.

For gifts that will be received right away, provide an official donation receipt.

For gifts that will be received later, provide a copy of all of the following:

Generally, when an individual dies, the individual is deemed to have disposed of all capital property immediately before the individual’s death.

Where the estate of an individual donates property that was the subject of a deemed disposition by the individual immediately before the individual’s death, and the property’s fair market value upon transfer to the qualified donee has changed, the difference will result in a gain or loss to the estate that will generally be recognized for income tax purposes. This will be the case whether or not the donation is a GRE donation or a former GRE donation.

If the property is certified cultural property or ordinarily benefits from a capital gains inclusion rate of zero, see the sections called “Gifts of certified cultural property” and “Capital gains realized on gifts of certain capital property” in Guide P113, Gifts and Income Tax. The same treatment will apply to the capital gains on the deemed disposition of the property immediately before the individual’s death if the property donated meets both of the following conditions:

This treatment will also apply to former GRE donations.

Additional special rules exist for the proceeds of disposition and cost amount of gifts of art, from the artist’s inventory, on and as a consequence of the artist’s death.

The deceased may have donated amounts in the five years before the year of death. As long as the deceased did not previously claim the amounts, you can claim them in the year of death. Where part of a donation has already been claimed, attach a note to the return giving the amounts and the year or years the donations were made. Also, attach any receipts that were not attached to previous returns, if applicable.

Note

Charitable donations cannot be carried forward from a T1 return to a T3 return.

The amount of the gift(s) that may be claimed on the deceased’s final return for purposes of the tax credit may be up to whichever of the following amounts is less:

For a gift of property made to a qualified donee, special rules may apply to limit the fair market value (FMV) of the property gifted, which limits the eligible amount of the gift that can be used in computing the donation tax credit amount. When the rules apply, the FMV of the donated property will be deemed to be the lesser of the property's:

Fair market value and adjusted cost base (ACB) are defined in Definitions.

The limitation on the eligible amount of a gift will apply where:

The limitation on the eligible amount of a gift will not apply to gifts of any of the following:

There are also special anti-avoidance rules that may apply where a taxpayer has attempted to avoid the application of the limitation rules. For more information, see Guide P113, Gifts and Income Tax.

If the property was acquired as part of a gifting arrangement that is a tax shelter, the eligible amount will be reported in box 13 of T5003 slip, Statement of Tax Shelter Information.

Sometimes, a capital property is gifted. At the time the property is gifted to a qualified donee, its FMV may be more than its ACB.

When the FMV is more than the ACB, you may designate an amount that is less than the FMV to be the proceeds of disposition. This may allow you to reduce the capital gain otherwise calculated. If you choose to designate an amount that is less than the FMV as the amount to be used as the proceeds of disposition, this amount will be used to determine the eligible amount of the donation. You can choose to designate an amount that is not greater than the FMV and not less than the greater of:

Treat the amount you choose as the proceeds of disposition when you calculate any capital gain.

For more information about charitable donations and the special rules that may apply, see Guide P113, Gifts and Income Tax, or Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.

Step 6 – Refund or balance owing

Enter the amounts that apply to the deceased on lines 42000 to 48200 using the information slips along with the instructions provided in Step 6 of the return, and on any applicable worksheet, schedule, and form. In this section of the guide, you will find information you may need to supplement the instructions on the return.

Use Form 428 included in the income tax package to calculate the provincial or territorial tax for the province or territory where the deceased was living at the time of death. To calculate the tax for the province of Quebec, you must use a Quebec provincial return.

This section does not provide supplementary information for lines 42000, 42100, 42120, 42200, 43200, 44000, 44800, 45000, 45400 to 45700, 47600, or 47900 as the instructions are on the return or in other information products that provide the information you need.

Note

The CRA cannot accept direct deposit applications for individuals who died in the year, or the preceding year.

Minimum tax

Minimum tax limits the tax advantage a person can receive in a year from certain incentives. Minimum tax does not apply to a person for the year of death. However, the deceased may have paid this tax in one or more of the seven years before the year of death. If this is the case, you may be able to deduct part or all of the minimum tax the deceased paid in those years from the tax owing for the year of death. To do this, complete Part 8 of Form T691, Alternative Minimum Tax. Attach Form T691 to the return.

Line 43700 – Total income tax deducted

If the deceased was a resident of a province other than Quebec on the date of death, claim the total of the amounts shown in the “Income tax deducted” box of all their Canadian information slips. If applicable, claim the total of the amount of tax determined on Form T1032, Joint Election to Split Pension Income. If the deceased had Quebec provincial income tax withheld from income, include those amounts on this line.

If the deceased was a resident of Quebec on the date of death, claim the total of the amounts shown in the “Income tax deducted” box of all their Canadian information slips. If applicable, claim the total of the amount of tax determined on Form T1032, Joint Election to Split Pension Income. Do not include on this return any of their Quebec provincial income tax deducted. Instead, claim it on their provincial income tax return for Quebec.

Line 45300 - Canada workers benefit (CWB)

If the deceased died after June 30, they may qualify for the CWB. This benefit is for low- income individuals and families who have earned income from employment or business.

For more information, see Schedule 6 which is included in the income tax package.

Line 45350 - Canada training credit (CTC)

You can claim for the deceased the CTC for eligible tuition and other fees paid to an eligible educational institution in Canada for courses they took in 2023, or fees they paid to certain bodies, in respect of an occupational, trade or professional examination taken in 2023.

For more information see line 45350, or see Guide P105, Students and Income Tax.

NEW!Line 45355 - Multigenerational home renovation tax credit (MHRTC)

The MHRTC is a new refundable tax credit that allows an eligible individual to claim certain renovation costs to create a secondary unit within an eligible dwelling so that a qualifying individual can reside with their qualifying relation.

If the deceased person was eligible, they can claim up to $50,000 in qualifying expenditures for each qualifying renovation completed, up to a maximum credit of $7,500 for each claim the deceased is eligible to make.

Complete Schedule 12, Multigenerational Home Renovation Tax Credit, to calculate the deceased person’s credit and enter the result on line 45355 of the deceased person’s return.

For more information, go to Multigenerational home renovation tax credit (MHRTC).

Line 46900 - Eligible educator school supply tax credit

If the deceased was an eligible educator, you can claim up to $1,000 for the cost of eligible supplies expenses the deceased paid for items used in 2023 for teaching or facilitating students’ learning.

For more information see line 46900.

Line 47555 - Canadian journalism labour tax credit (CJLTC)

If the deceased was a member (other than a specified member) of a partnership that was a qualifying journalism organization in 2023, you can claim the CJLTC allocated to the deceased by the partnership. The amount that can be claimed for the deceased is shown in box 236 of their T5013 slip for 2023.

Note

This credit is considered government assistance and must be included in the deceased’s business income (line 13500 of the return) in the same tax year.

For more information, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Line 47556 – Return of fuel charge proceeds to farmers tax credit

If the deceased was a self-employed farmer or an individual who was a member of a partnership operating a farming business with one or more permanent establishments in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island or Saskatchewan, the deceased may be eligible for this credit.

Partnerships

If the deceased was a member of a partnership, you can claim the tax credit allocated to the deceased by the partnership. The amount that can be claimed for the deceased is shown in box 237 of their T5013 slip for 2023.

Note

This credit is considered government assistance and must be included in farming income (line 14100 of the return) in the same tax year the credit is claimed.

To claim this credit, complete Form T2043, Return of Fuel Charge Proceeds to Farmers Tax Credit.

Line 47557 – Air quality improvement tax credit

 If the deceased was a member of a partnership in 2023, you can claim the amount of the credit allocated to the deceased by the partnership for its fiscal period ending in 2023.

The amount allocated to the deceased is shown in box 238 of the deceased’s T5013 slip or in a letter provided to the deceased by the partnership.

Enter on line 47557 of the return the total amount allocated to the deceased from all partnerships.

Signing the return

As the legal representative for the deceased, you have to sign the return in the area provided on the last page of the return. Sign your name and indicate your title (for example, executor or administrator).

Chapter 3 - Optional returns

Optional returns are returns on which you report some of the income that you would otherwise report on the final return. By filing one or more optional returns, you may reduce or eliminate tax for the deceased. This is possible because you can claim certain amounts more than once, split them between returns, or claim them against specific kinds of income.

Chart 1 summarizes the information in this chapter. You may also want to get Archived Interpretation Bulletin IT-326R3, Returns of Deceased Persons as "Another Person."

You may be able to file an optional return for each of the following:

Note

Do not confuse the optional return for income from a graduated rate estate with the T3 Trust Income Tax and Information Return, described in Your responsibilities as the legal representative. After someone dies, a will or a court order may create a trust, and the trustee, executor, or administrator may be required to file a T3 return. Also, an individual may be required to file a T3 return to report income earned after the date of death or for CPP or QPP death benefits. For more information, see Chart 2 and the T4013, T3 Trust Guide.

Signing an optional return

You have to sign an optional return in the area provided on the last page of the return. Sign your name and indicate your title (for example, executor or administrator).

What are the three optional returns?

1. Return for rights or things

Rights or things are amounts that had not been paid to the deceased at the time of their death and that, had the person not died, would have been included in their income when received. Rights or things can come from employment and other sources.

You can file a return for rights or things to report the value of the rights or things at the time of death. However, if you file a return for rights or things, you have to report all rights or things on that return, except those transferred to beneficiaries. You cannot split rights or things between the final return and the return for rights or things.

If you transfer rights or things to a beneficiary, you have to do so within the time limit for filing a return for rights or things. The beneficiary must report the income from the transferred rights or things on their return.

Employment rights or things

Employment rights or things are salary, commissions, and vacation pay, as long as both of these conditions are met:

Other rights or things

Other rights or things include:

For more information about rights or things, see the following archived Interpretation Bulletins: 

Some items that are not rights or things include:

How to file - If you decide to file a return for rights or things, you will need to:

  1. Get an Income tax and benefit return.
  2. Write "70(2)" in the top right corner of page 1 of the return.
  3. Follow the instructions in this guide.

You have to file this return by the later of:

However, the due date for any balance of tax owing on a rights or things return depends on the date of death. See Due date for a balance owing.

Election to delay payment of income tax

In some cases, you can delay paying part of the amount owing from rights or things. However, the CRA still charges interest on any unpaid amount from the day after the due date to the date you pay the amount in full.

If you want to delay payment, you will have to give the CRA security for the amount owing. You also have to complete Form T2075, Election to Defer Payment of Income Tax, under subsection 159(5) of the Income Tax Act by a Deceased Taxpayer's Legal Representative or Trustee. For more information, call 1-888-863-8657.

How to cancel a return for rights or things

If you file a return for rights or things before the due date, but later want to cancel it, the CRA will cancel the return if, on or before the filing due date for the rights or things return, you send the CRA a note asking for the return to be cancelled.

2. Return for a partner or proprietor

A deceased person may have been a partner in, or the sole proprietor of, a business. The business may have a fiscal year that does not start or end on the same dates as the calendar year. If the person died after the end of the business's fiscal period but before the end of the calendar year in which the fiscal period ended, you can file an optional return for the deceased.

If you choose not to file this optional return, report all business income on the final return.

Example

A person who had a business died on May 28, 2023. The business has a March 31 fiscal year-end.

You have two choices when you report the person's 2023 income:

  • Include the business income from April 1, 2022, to May 28, 2023 on the final return.
  • File a return for a partner or proprietor in addition to the final return.
    • On the final return, include business income from April 1, 2022, to March 31, 2023.
    • On the return for a partner or proprietor, report the business income from April 1, 2023, to May 28, 2023.

How to file - If you decide to file an optional return for a partner or proprietor, you will need to:

  1. Get an Income Tax and Benefit Return.
  2. Write "150(4)" in the top right corner of page 1 of the return.
  3. Follow the instructions in this guide.
  4. To determine the business income to be reported on the final return and the optional return, follow the instructions in the section “Death of a partner or proprietor in the year,” on Form T1139, Reconciliation of 2023 Business Income for Tax Purposes.

The due date for this optional return is the same as for the final return. The due date for a balance owing depends on the date of death. See Due date for the final return and Due date for a balance owing

For more information, see archived Interpretation Bulletin IT-278R2, Death of a Partner or of a Retired Partner.

3. Return for income from a graduated rate estate

You can file an optional return for a deceased person who received income from a graduated rate estate (GRE). The GRE may have a fiscal period (tax year) that does not start or end on the same dates as the calendar year. If the person died after the end of the fiscal period of the GRE, but before the end of the calendar year in which the fiscal period ended, you can file an optional return for the deceased.

On this return, report the income for the time from the end of the fiscal period to the date of death. If you choose not to file this optional return, report all income from the GRE on the final return.

Example

A husband gets income from a testamentary trust with a fiscal year from April 1 to March 31. The trust was formed as a result of his wife's death on March 31, 2022 and designates itself as a GRE of the wife in its return of income for March 31, 2023. The husband died on June 11, 2023.

You have two choices when you report the husband's income from the trust:

  • Include the husband's income from the GRE from April 1, 2022, to June 11, 2023, on his final return.
  • File a return for income received from the GRE in addition to the final return.
    • On the husband's final return, include the income from the GRE from April 1, 2022, to March 31, 2023.
    • On the optional return for income from the GRE, report the income from April 1, 2023, to June 11, 2023.

How to file - If you decide to file a return for income from a graduated rate estate, you will need to:

  1. Get an Income Tax and Benefit Return.
  2. Write "104(23)(d)" in the top right corner of page 1 of the return.
  3. Follow the instructions in this guide.

You have to file this optional return and pay any amount owing by the later of:

Amounts for optional returns

There are three groups of amounts you can claim on the optional returns. They are amounts you can:

Amounts you can claim in full on each return

On each optional return and on the final return, you can claim:

Amounts you can split between returns

There are certain amounts you cannot claim in full on the final return and optional returns. However, you can split these amounts between the returns.

When you split an amount, the total of the claims cannot be more than what would have been allowed if you were only filing the final return. Amounts you can split are:

Example

In 2023, a woman died and her total medical expenses were $18,000. You decide to file a rights or things return in addition to the final return. The total of her net income on the two returns is $40,000. Of this, $30,000 is on the final return and $10,000 is on the rights or things return.

You decide to split the $18,000 of medical expenses and claim 2/3 on the final return and 1/3 on the rights or things return.

2/3 of $18,000

=

$12,000 (to claim on final return)

1/3 of $18,000

=

$6,000 (to claim on rights or things return)

The medical expense reduction is the lesser of $2,635 or 3% of the total net income. In this example, the reduction is $1,200 ($40,000 x 3%), which is less than $2,635.

The medical expense reduction must also be split between the 2 returns in the same proportion as the medical expenses.

2/3 of $1,200

=

$800
1/3 of $1,200

=

$400
Amounts for medical expenses on final return

$12,000  −  $800  =  $11,200

Amounts for medical expenses on rights or things return

 $6,000  −  $400  =  $5,600

The amounts for medical expenses are $11,200 on the final return and $5,600 on the rights or things return.

Amounts you can claim only against certain income

There are some amounts you can only claim on those returns on which you report the related income. The amounts are:

Example

A deceased person's total employment income in the year of death was $30,000, and the CPP contribution was $800. Of the $30,000, $1,000 is a right or thing. Of the $800, $27 is the CPP contribution the person paid on the $1,000. You decide to file a return for rights or things.

On the final return, you report income of $29,000 and claim a CPP contribution of $773. On the return for rights or things, you include income of $1,000 and claim a CPP contribution of $27.

There are certain amounts you cannot normally claim on an optional return. They include:

You may be able to claim these amounts on the final return.

For more information on other credits, see Chart 1.

Chapter 4 - Deemed disposition of property

This chapter gives information on the tax treatment of capital property the deceased owned at the date of death. It discusses capital property in general, as well as the particular treatment of depreciable and farm and fishing property. Only property acquired after December 31, 1971, is discussed.

There are special rules for property that a deceased person owned before 1972. For details about these rules and for information about other property such as resource property or an inventory of land, contact the CRA at 1-800-959-8281.

Some of the terms in this chapter are defined under Definitions.

General information

When a person dies, the person is considered to have disposed of all capital property immediately before death. This is known as a deemed disposition. This is applicable to all persons, regardless of where they reside. 

Also, immediately before death, the person is considered to have received the deemed proceeds of disposition (throughout this chapter, this will be referred to as deemed proceeds). Even though there was not an actual sale, there can be a capital gain or, except for depreciable property or personal-use property, a capital loss.

For depreciable property, in addition to a capital gain, there can be a recapture of capital cost allowance. Also, for depreciable property, instead of a capital loss there may be a terminal loss. These terms are explained below.

What is a capital gain?

When the proceeds or deemed proceeds of disposition of a capital property are more than its adjusted cost base, the result is a capital gain. In most cases, one-half of the capital gain is the taxable capital gain.

Use Schedule 3, Capital Gains (or Losses), to calculate the taxable capital gain to report on the final return.

Capital gains reserve amounts

Deceased taxpayer

In most cases, you cannot deduct a reserve in the year of death. However, where, as a consequence of the death of the taxpayer, their right to receive the outstanding amounts has been transferred to a spouse or common-law partner, or spousal or common-law partner trust, the legal representative and the beneficiary can choose to claim a reserve on the deceased’s return. To do this, complete Form T2069, Election in Respect of Amounts Not Deductible as Reserves for the Year of Death, and attach a copy to the deceased’s return.

Spouse or common-law partner, or spousal or common-law partner trust

Any amount claimed as a reserve in the deceased’s final return must be included in the income of the spouse or common-law partner, or spousal or common-law partner trust (herein referred to as spouse or spousal trust) in the year of death. In the same year, the spouse or spousal trust may claim a reserver, determined as if the property was disposed of by the spouse or spousal trust at the time it was disposed of by the deceased.

What is a capital gains deduction?

This is a deduction you can claim for the deceased person against eligible taxable capital gains from the disposition or deemed disposition of certain capital property.

You may be able to claim the capital gains deduction on taxable capital gains the deceased had in 2023 from any of the following:

The lifetime capital gains exemption (LCGE) is $971,190 for dispositions of QSBC shares in 2023. Since the inclusion rate for capital gains and losses is 50%, the lifetime capital gains deduction limit is $485,595 (50% of $971,190) for dispositions of QSBC shares in 2023.

For dispositions of qualified farm or fishing property, an additional deduction is available which increases the LCGE limit to $1,000,000. Accordingly, the lifetime capital gains deduction limit is increased to $500,000 (50% of $1,000,000) for those properties. This additional deduction does not apply to dispositions of QSBC shares.

For more information, see Guide T4037, Capital Gains.

What is a capital loss?

When the proceeds or deemed proceeds of disposition of a capital property are less than its adjusted cost base, the result is a capital loss. One-half of the capital loss is the allowable capital loss.

You cannot have a capital loss on the disposition of depreciable property or personal use property. However, you may have a terminal loss in respect of certain depreciable property. See the next section.

For more information on claiming a capital loss, see Net capital losses in the year of death.

Recaptures and terminal losses

For depreciable property, when the proceeds or deemed proceeds of disposition are more than the undepreciated capital cost, you will usually have a recapture of capital cost allowance. Include the recapture in income on the deceased's final return.

For depreciable property, when the proceeds or deemed proceeds of disposition are less than the undepreciated capital cost, the result is a terminal loss. Deduct the terminal loss on the deceased's final return.

Note

A terminal loss is not allowed for depreciable property that was personal-use property of the deceased.

For more information about a recapture of capital cost allowance or a terminal loss, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Deemed proceeds of disposition for capital property other than depreciable property

The rules for calculating the deemed proceeds for depreciable property are explained in Deemed proceeds of disposition for depreciable property. If there is a transfer of farm or fishing property to a child, see Deemed proceeds of disposition for farm or fishing property transferred to a child.

Principal residence

If the deceased owned (or co-owned) property that was their principal residence, there is a deemed disposition of the property on death. A principal residence designation must be made by completing page 2 of Schedule 3, Capital Gains (or Losses) and Form T1255, Designation of a Property as a Principal Residence by the Legal Representative of a Deceased Individual.

Where the principal residence is transferred to the deceased’s spouse, common-law partner, or testamentary spousal or common-law partner trust (under the conditions described in the next section), the CRA does not require you to make a principal residence designation for the period before death. Instead, the disposition must be reported and the designation may be made by the surviving spouse, common-law partner, or the trust at the earlier of the time of actual disposition or death of the surviving spouse. Therefore, a record should be kept of the years for which the deceased individual would have been eligible to make a principal residence designation for the particular property.

For more information on the reporting requirements when there is a disposition of a principal residence, see Chapter 6 of Guide T4037, Capital Gains, and Income Tax Folio S1-F3-C2, Principal Residence.

NEW!Property flipping

Starting January 1, 2023, any gain from the disposition of a housing unit (including a rental property) located in Canada or a right to acquire a housing unit located in Canada that the deceased owned or held for less than 365 consecutive days before its disposition is deemed to be business income and not a capital gain, unless the property was already considered inventory or the disposition occurred due to, or in anticipation of, certain life events. 

If the property is not considered a flipped property, whether the income from selling the property should be treated as business income or as a capital gain depends on the specific details of the situation. If the disposition is considered:

a capital gain, complete Schedule 3, Capital Gains (or Losses)

business income, complete Form T2125, Statement of Business or Professional Activities

For more information about flipped property and life-event exceptions, go to Residential Property Flipping Rule or see Schedule 3.

For more information about business income, go to Business income or see Guide T4002, Self-employed Business, Professional, Commission, Farming and Fishing income.

Deceased's deemed proceeds - Transfer to spouse or common-law partner, or testamentary spousal or common-law partner trust

There may be a transfer of capital property (including farm property, or fishing property) from a deceased person who was a resident of Canada immediately before death to a spouse or common-law partner, or a testamentary spousal or common-law partner trust.

For a transfer to a spouse or common-law partner, the deemed proceeds are the same as the property's adjusted cost base immediately before death, if both of these conditions are met:

For a transfer to a testamentary spousal or common-law partner trust, the deemed proceeds are the same as the property's adjusted cost base immediately before death, if both of these conditions are met:

Where these conditions are met, the deceased will not have a capital gain or loss. This is because the transfer postpones any gain or loss to the date the beneficiary actually disposes of the property.

Example

A person's will transfers non-depreciable capital property to the spouse or common-law partner, and both of the conditions for transfer to a spouse or common-law partner are met. Immediately before death, the adjusted cost base of the property was $35,000. Therefore, the deemed proceeds are $35,000. You would not report any capital gain or loss on the deceased's final return.

Tax tip

You can elect not to have the deemed proceeds equal the adjusted cost base. If you make this choice, the deemed proceeds are equal to the property's fair market value immediately before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to use a capital gains deduction (see What is a capital gains deduction?) or a net capital loss on the deceased's final return. It may be more beneficial to report a capital gain or loss on the final return instead of deferring it to the spouse or common-law partner, or spousal or common-law partner trust.

In this situation, you may be able to make a principal residence designation by reporting the disposition on Schedule 3 and completing Form T1255, in order to claim the principal residence exemption.

Deceased's deemed proceeds - All other transfers

For all other transfers, the deemed proceeds are equal to the property's fair market value immediately before death.

Deemed proceeds of disposition for depreciable property

If there is a transfer of farm or fishing property to a child, see Farm or fishing property transferred to a child.

Deceased's deemed proceeds - Transfer to spouse or common-law partner, or testamentary spousal or common-law partner trust

There may be a transfer of depreciable property (including depreciable farm property or fishing property) to a spouse or common-law partner, or a testamentary spousal or common-law partner trust. For these transfers, you may be able to use a special amount (as explained below) for the deemed proceeds. When you use this special amount, the deceased will not have a capital gain, recapture of capital cost allowance, or a terminal loss. The transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.

The conditions required to use this special amount are the same as those listed for a transfer of capital property to a spouse or common-law partner, or testamentary spousal or common-law partner trust.

The special amount (deemed proceeds) is whichever of the following amounts is less:

Example

A woman had two trucks that were used in her business. The woman died in July 2023, and the will transferred one truck to her husband. Both of the conditions for transfer to a spouse or common-law partner are met.

You have the following details:

Capital cost of transferred truck

$22,500

Capital cost of the two trucks

$50,000

The deceased's deemed proceeds on the transferred truck are whichever of the following amounts is less:

  • $22,500
  • $22,500 ÷ $50,000 × $33,500 = $15,075

The deemed proceeds are $15,075.

When there is more than one property in the same class, you can choose the order in which the deceased is deemed to have disposed of the properties. When you calculate the special amount, adjust the undepreciated capital cost and the total capital cost of the properties in the class to exclude previous deemed dispositions.

Note

When determining the special amount, you will need to recalculate the capital cost of property in the class when any of the following applies:

  • The property was acquired in a non-arm's length transaction.
  • The property was previously used for something other than gaining or producing income.
  • The part of a property used for gaining or producing income changed.

For more information, contact the CRA at 1-800-959-8281.

Tax tip

You can elect not to use the special amount for the deemed proceeds. If you make this choice, the deemed proceeds are equal to the property's fair market value immediately before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to claim a capital gains deduction (see What is a capital gains deduction?) on the final return. It may be more beneficial to report a capital gain, recapture, or terminal loss on the final return instead of deferring it to the spouse or common-law partner, or spousal or common-law partner trust.

Deceased's deemed proceeds - All other transfers

For all other transfers, the deemed proceeds are equal to the property's fair market value immediately before death.

Deemed proceeds of disposition for farm or fishing property transferred to a child

For this kind of transfer, you may be able to use a special amount for the deemed proceeds. When you use this special amount, the deceased will not have a capital gain, recapture of capital cost allowance, or a terminal loss. The transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.

In this section, when referring to the transfer of farm or fishing property, the terms farm property, fishing property, and child have the following meanings:

Farm property includes land and depreciable property of a prescribed class used for farming.

Fishing property includes land and depreciable property of a prescribed class used for fishing.

A child includes:

Conditions

To use the special amount for the deemed proceeds, all of the following conditions have to be met:

The rollover provisions available for farm property also apply to land and depreciable property used mainly in a woodlot farming business. They apply where the deceased, the deceased's spouse or common-law partner, or any of the deceased's children was engaged in the woodlot operation as required by a prescribed forest management plan in respect of the woodlot. These provisions apply to transfers of property that occur after December 10, 2001. For more information, see Archived Interpretation Bulletin IT-373R2 - Woodlots, or contact the CRA at 1-800-959-5525.

You may also be able to use a special amount for the deemed proceeds when a share of the capital stock of a family farm corporation or an interest in a family farm partnership is transferred to a child.

For details, see archived Interpretation Bulletin IT-349R3 - Intergenerational Transfers of Farm Property on Death.

You may also be able to use a special amount for the deemed proceeds when a share of the capital stock of a family fishing corporation or an interest in a family fishing partnership is transferred to a child.

Deceased's deemed proceeds – Transfer of farmland to a child

If all three conditions listed previously are met, you can choose to have the deemed proceeds equal to the adjusted cost base of the land immediately before death. Therefore, the deceased will not have a capital gain or loss.

Tax tip

You can elect not to have the deemed proceeds equal the adjusted cost base. If you make this choice, you can transfer the land for any amount between its adjusted cost base and fair market value immediately before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to claim the capital gains deduction (see What is a capital gains deduction?) or a net capital loss on the final return. It may be more beneficial to report a capital gain or loss on the final return instead of deferring it to a child.

Deceased's deemed proceeds – Transfer of depreciable farm or fishing property to a child

If there is a transfer of depreciable farm property, or depreciable fishing property, you may be able to use a special amount for the deemed proceeds. To use this special amount, the three conditions have to be met.

In most cases, when you use this special amount, the deceased will not have a capital gain, a recapture of capital cost allowance, or a terminal loss. This is because the transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.

The special amount (deemed proceeds) is whichever of the following amounts is less:

Example

A man who owned three fishing boats died in August 2023. His will transferred one boat to his son. The three conditions for transfer of fishing property to a child are met.

You have the following details:

Capital cost of the transferred boat

$45,000

Capital cost of all three boats

$100,000

The deceased's deemed proceeds on the transferred boat are the lesser of:

  • $45,000
  • $45,000 ÷ $100,000 x $90,000 = $40,500.

The deemed proceeds are $40,500.

When there is more than one property in the same class, you can choose the order in which the deceased is deemed to have disposed of the properties. When you calculate the special amount, adjust the undepreciated capital cost and the total capital cost of the properties in the class to exclude previous deemed dispositions.

Note

When you determine the special amount, you will need to recalculate the capital cost of any property in the class when any of the following applies:

  • The property was acquired in a non-arm's length transaction.
  • The property was previously used for something other than gaining or producing income.
  • The part of a property used for gaining or producing income changed.

For more information, call 1-800-959-5525.

Tax tip

You can elect not to use the special amount for the deemed proceeds. If you make this choice, you can transfer the property for any amount between the special amount and its fair market value immediately before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to claim the capital gains deduction (see What is a capital gains deduction?) on the final return. It may be more beneficial to report a capital gain, recapture, or terminal loss on the final return instead of deferring it to a child.

For more information, see archived Interpretation Bulletin IT-349R3 - Intergenerational Transfers of Farm Property on Death, or contact the CRA. You may also refer to Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Election to delay payment of income tax

Generally, you have to pay any amount owing on a return when the return is due. In some cases, you can delay paying part of the income tax due. For instance, you can delay paying part of the amount owing from the deemed disposition of capital property. Remember that the CRA charges interest on any unpaid amount, from the day after the due date to the date you pay the amount in full.

If you want to delay payment, you will have to give the CRA security for the amount owing. You also have to complete Form T2075, Election to Defer Payment of Income Tax, under subsection 159(5) of the Income Tax Act by a Deceased Taxpayer's Legal Representative or Trustee. For more information, call 1-888-863-8657.

Chapter 5 - Net capital losses

This chapter explains how to apply a net capital loss that was incurred in the year of death. There are also explanations on how to apply net capital losses from earlier years to the final return and the return for the year before the year of death.

Note

Net capital losses cannot be carried forward from a T1 return to a T3 return.

Some of the terms in this chapter are defined in Definitions.

What is a net capital loss?

Generally, when allowable capital losses are more than taxable capital gains, the difference is a net capital loss. The rate used to determine the taxable part of a capital gain and the allowable part of a capital loss is called an inclusion rate.

For 2023, the inclusion rate is one-half. Therefore, an allowable capital loss is one-half of a capital loss and a taxable capital gain is one-half of a capital gain.

Net capital losses in the year of death

To apply a net capital loss that was incurred in the year of death, you can use either Method A or Method B.

Method A - You can carry back a 2023 net capital loss to reduce any taxable capital gains in any of the three tax years before the year of death. If you are applying it against taxable capital gains realized in 2020, 2021, or 2022, you do not need to make any adjustment because the inclusion rate is the same in all three years. The loss you carry back cannot be more than the taxable capital gains in those years. To ask for a loss carryback, complete "Section III - Net capital loss for carryback" on Form T1A, Request for Loss Carryback, and send it to your tax centre. Do not file an amended return for the year to which you want to apply the loss.

After you carry back the loss, there may be an amount left. You may be able to use some of the remaining amount to reduce other income on the final return, the return for the year before the year of death, or both returns. However, before you do this, you have to calculate the amount you can use.

From the net capital loss you have left, subtract any capital gains deductions the deceased has claimed to date. Use any loss left to reduce other income for the year of death, the year before the year of death, or for both years.

If you claim any remaining net capital loss in the year of death, you should claim it as a negative amount in brackets at line 12700 of the final return.

Note

Do not use a capital loss claimed against other income at line 12700 in the calculation of net income for the purposes of calculating other amounts such as social benefit repayments, provincial or territorial tax credits, and those non-refundable tax credits requiring the use of net income.

Method B - You can choose not to carry back the net capital loss to reduce taxable capital gains from earlier years. You may prefer to reduce other income on the final return, the return for the year before the year of death, or both returns. However, before you do this, you have to calculate the amount you can use.

From the net capital loss, subtract any capital gains deductions the deceased has claimed to date. Use any loss remaining to reduce other income for the year of death, the year before the year of death, or for both years.

If you claim any remaining net capital loss in the year of death, you should claim it as a negative amount in brackets at line 12700 of the final return.

Example

A man died on June 20, 2023. You have the following details about his tax matters:

Taxable capital gains in 2021

$4,000

Taxable capital gains in 2020

$2,000

Total capital gains deductions claimed to date

$4,000

He did not claim any capital gains deductions for 2020 or 2021 

You can use Method A or Method B.

Method A

If you choose Method A, you can use the net capital losses to reduce his 2021 taxable capital gains to zero ($11,000 − $4,000). Then, you can use the remaining balance of $7,000 to reduce his 2020 taxable capital gain to zero ($7,000 − $2,000).

After you subtract his capital gains deductions ($5,000 − $4,000), you still have $1,000 left to reduce the man's other income for 2023 or 2022 or for both years.

Method B

If you choose to use this method, you will first deduct his capital gains deductions of $4,000 from his net capital loss in 2023 of $11,000. You can now use the remaining $7,000 to reduce the man's other income for 2023 or 2022, or for both years.

Note

If you claim any remaining net capital loss in the year before the year of death, you will need to complete Form T1-ADJ, T1 Adjustment Request, or send the CRA a signed letter providing the details of your request. Send your Form T1-ADJ or letter separately from the deceased's final return. Applying a 2023 net capital loss to a previous year may reduce any capital gains deductions the deceased claimed in that year or a following year.

Net capital losses before the year of death

The deceased may have had a net capital loss before the year of death but never applied it. If so, you can apply the loss against taxable capital gains on the final return. If the net capital loss arose after 1987 and before 2001, you will need to make an adjustment to the inclusion rate as explained below. If there is still an amount left, you may be able to use it to reduce other income on the final return, the return for the year before the year of death, or both returns. If you decide to claim this loss on the final return, enter it at line 25300.

Note

You cannot use the net capital losses of other years to create a negative taxable income for any year.

You have to apply net capital losses of earlier years before you apply net capital losses of later years. For example, if you have net capital losses in 1997 and 1999 and want to apply them against your taxable capital gains in 2023, you have to follow a certain order. First, apply your 1997 net capital loss against your taxable capital gain. Then apply your 1999 net capital loss against it.

The inclusion rate used to determine the taxable part of a capital gain and the allowable part of a capital loss has changed over the years. If the inclusion rate of 1/2 for 2023 is different from the inclusion rate in effect the year the loss occurred, you will need to adjust the loss before applying it to the taxable capital gain in 2023.

To apply a previous-year loss to 2023, you will need to adjust the loss as follows:

When you make these calculations, you get the adjusted net capital loss.

Now you can reduce taxable capital gains in the year of death. To do this, use whichever of the following amounts is less:

After you reduce the taxable capital gains, some of the loss may be left. You may be able to use this amount to reduce other income for the year of death, the year before the year of death, or for both years. However, before you do this, you may have to calculate the amount you can use.

If you had to adjust the loss before applying it to the 2023 taxable capital gain, you will now have to readjust the loss that remains as follows:

The result is your readjusted balance of net capital losses. From this balance, subtract all capital gains deductions claimed to date, including those on the final return. If there is an amount left, you can use it to reduce other income for the year of death, the year before the year of death, or for both years.

Example

A woman died in August of 2023. You have these details about her tax matters:

Taxable capital gain in 2023
 

$6,000

Capital gains deductions claimed to date

$4,000

You decide to use the 1999 loss to reduce the 2023 taxable capital gain and to use any amount left to reduce other income for 2023.

You have to adjust the 1999 net capital loss before you can apply it. Multiply it by 2/3 to get the adjusted net capital loss:

$18,000 x 2/3 = $12,000

To reduce the 2023 taxable capital gain, use the lesser of:

  • $12,000 (adjusted net capital loss)
  • $6,000 (2023 taxable capital gain)

After you use $6,000 of the loss to reduce the gain to zero, you still have $6,000 ($12,000 − $6,000) left. You can use this amount to reduce the deceased's other income for 2023.

To determine the amount to use, you have to readjust the $6,000. Because the loss occurred in 1999, multiply the amount left by 3/2 to get the readjusted balance:

$6,000 x 3/2 = $9,000

From the readjusted balance, subtract all capital gains deductions claimed to date:

$9,000 − $4,000 = $5,000

You can use $5,000 to reduce the deceased's other income for 2023. If you decide not to use the total of this balance in 2023, you can use the amount that is left to reduce other income for 2022.

Note

If you claim a capital gains deduction for the year of death or the year before the year of death, subtract it from the balance of net capital losses you have available to reduce other income in those years. For more details about capital gains and losses, as well as the capital gains deduction, see Guide T4037, Capital Gains.

Disposition of estate property by the legal representative

As the legal representative, you may continue looking after the deceased's estate through a trust. If you dispose of capital property, the result may be a net capital loss. If you dispose of depreciable property, the result may be a terminal loss.

Usually, you would claim these losses on the trust's T3 Trust Income Tax and Information Return. However, in the first tax year of a deceased person's graduated rate estate (GRE), you can elect to treat all or part of these losses as losses of the deceased on the deceased's final return.

To make the election, you must file an amended final T1 return of income for the deceased taxpayer. To benefit from the election, the losses to be applied to the final return of the deceased cannot be processed prior to the assessment of the GRE’s tax year in which the losses were realized. A net capital loss realized in this first tax year cannot be applied to any tax year before the year of death. For more information, see "164(6) election" in Chapter 3 of the T4013, T3 Trust Guide.

Appendix

Chart 1 – Returns for the year of death

The following tables list all types of income, deductions, and credits and indicate on what type of return each can or must be reported or claimed.

Section 1. Total Income
Line Final return 70(1) Return for rights or things 70(2) Return for a partner or proprietor 150(4) Return for income from a graduated rate estate 104(23)(d)
10100 to 14600
  • All income received before death
  • All income from deemed dispositions
  • All periodic payments (for example, rent, salary, and accrued interest)
  • Salary, commissions, and vacation pay owed before the death and paid after death (note1)
  • Retroactive salary adjustments owed and paid after death
  • Old Age Security (OAS), Canada Pension Plan/Quebec Pension Plan (CPP/QPP) paid after the date of death for the month of death
  • CPP and Employment Insurance (EI) arrears
  • Accounts receivable, supplies, and inventory (note 2)
  • Uncashed matured bond coupons
  • Bond interest earned but not received before death
  • Dividends declared before the date of death, but not received
  • Crops, livestock (note3)
  • Work in progress (note4)

Income from the business from the end of the business' fiscal period ending in the calendar year of death to the date of death

Income from the trust from the end of the trust's fiscal period ending in the calendar year of death to the date of death
Section 2. Deductions for calculating net income
Line Final return 70(1) Return for rights or things 70(2) Return for a partner or proprietor 150(4) Return for income from a graduated rate estate 104(23)(d)
20700 to 23200 All deductions from lines 20700 to 23200 that are allowable

Generally, none of these deductions can be claimed

 Same as for the rights or things 70(2) return Same as for the rights or things 70(2) return
23500 Social benefits repayments note 5 not applicable not applicable
Section 3. Deductions for calculating taxable income – Split deductions Table Note 6
Line Final return 70(1) Return for rights or things 70(2) Return for a partner or proprietor 150(4) Return for income from a graduated rate estate 104(23)(d)
24400 Canadian Forces personnel and police deduction note 7 not applicable not applicable
24900 Security options deductions note 7 not applicable not applicable
25000 Other payments not applicable not applicable not applicable
25100 to 25500 Losses or other deductions no no no
25600 Vow of perpetual poverty yes not applicable not applicable
Section 4. Federal non-refundable tax credits Table Note 12
Line Final return 70(1) Return for rights or things 70(2) Return for a partner or proprietor 150(4) Return for income from a graduated rate estate 104(23)(d)
30000 to 30450, 30500 All personal amounts (including the Canada caregiver amount) yes – in full yes – in full yes – in full
Section 5. Federal non-refundable tax credits Table Note 12 – Split amounts Table Note 6
Line Final return 70(1) Return for rights or things 70(2) Return for a partner or proprietor 150(4) Return for income from a graduated rate estate 104(23)(d)
30800 CPP or QPP contributions note 7 not applicable not applicable
31000 CPP or QPP contributions on self-employed income not applicable yes not applicable
31200 EI premiums note 7 not applicable not applicable
31220 Volunteer firefighters' amount yes yes yes
31240 Search and rescue volunteer amount yes yes yes
31260 Canada employment amount yes no no
31270 Home buyers' amount yes yes yes
31285 Home accessibility expenses yes yes yes
31300 Adoption expenses yes yes yes

31350

 Digital news subscription expenses yes yes yes
31400 Pension income amount note 8 not applicable note 8
31600 Disability amount yes yes yes
31800 Disability amount transferred from a dependant yes yes yes
31900 Interest on student loans yes yes yes
32300 Tuition, education, and textbook amounts yes yes yes
32400 Tuition amount transferred from a child yes  yes  yes 
32600 Amounts transferred from spouse or common-law partner no no no
33099 Medical expenses note 9 note 9 note 9
34000 Charitable donations note 10 note 10 note 10
34200 Cultural and ecological gifts yes yes yes
Section 6. Refund or balance owing
Line Final return 70(1) Return for rights or things 70(2) Return for a partner or proprietor 150(4) Return for income from a graduated rate estate 104(23)(d)
41200 Investment tax credit no no no
42200 Social benefits repayment note 5 not applicable not applicable
40425 Federal dividend tax credit note 11 not applicable note 11
40427 Minimum tax carryover no no no
45200 Refundable medical expense supplement  no no no
45300 Canada workers benefit (CWB)  no  no  no 
45350 Canada training credit (CTC)   yes yes yes
45355 Multigenerational home renovation tax credit (MHRTC) yes yes yes
46900 Eligible educator school supply tax credit
 no no no
47555 Canadian journalism labour tax credit no no no
47556 Return of fuel charge proceeds to farmers tax credit yes yes no
47557 Air quality improvement tax credit no yes no
Chart 2 - Income reported on the T3 Trust Income Tax and Information Return
Enter the following amounts on line 19 of the T3 Trust Income Tax and Information Return, for the year in which you receive the income. If the income is received in a year after the year of death, report it on the T3 return for that later year.
  Type of income Information slip
1 Severance pay received because of death. Since this is a death benefit, up to $10,000 may be non-taxable. T4A, box 106
2 Future adjustments to severance pay regardless of when the collective agreement was signed. T4A, box 028
3 Refund of pension contributions payable because of death. T4A, box 018
4 Guaranteed minimum pension payment. This is not a death benefit. T4A, box 018
5 Deferred profit-sharing plan payment. T4A, box 018
6 Pension or superannuation periodic payments. T4A, box 016
7 I.A.A.C. annuity. T4A, box 024
8 Income earned in a RRIF after annuitant dies. T4RIF, box 22
9 Income earned in an RRSP after annuitant dies. T4RSP, box 28
10 CPP or QPP death benefit, if not reported by the recipient. T4A(P), box 18

Chart 3 - Non-taxable amounts

Do not report the following amounts on a T1 final return for a deceased person or a T3 return for a trust:

  1. Retroactive adjustments to the following employment income when a collective agreement or other authorizing instrument has been signed after the date of death:
    • salary or wages (including overtime) from the end of the last pay period to the date of death
    • salary or wages (including overtime) for a pay period finished before the date of death, but paid after death
    • payment for vacation leave earned but not taken
  2. Group term insurance such as the federal government's supplementary death benefit.

References

The following publications are available at Forms and Publications or by calling 1-800-959-8281.

Forms

 

Guides

Income tax folios

Information circulars

Interpretation bulletins (archived)

Information sheets

For more information

If you need help

If you need more information after reading this guide, go to Doing taxes for someone who died or call 1-800-959-8281.

Forms and publications

The CRA encourages you to file your return electronically. If you need a paper version of the CRA's forms and publications, go to Forms and Publications or call 1-800-959-8281.

Tax Information Phone Service (TIPS)

For tax information by telephone, use the CRA's automated service, TIPS, by calling 1-800-267-6999.

Teletypewriter (TTY) users

If you use a TTY for a hearing or speech impairment, call 1-800-665-0354.

If you use an operator-assisted relay service, call the CRA's regular telephone numbers instead of the TTY number.

Formal disputes (objections and appeals)

You have the right to file an objection if you disagree with an assessment, determination, or decision.

For more information about objections and related deadlines, go to Objections, appeals, disputes, and relief measures.

CRA Service Feedback Program

Service complaints

You can expect to be treated fairly under clear and established rules, and get a high level of service each time you deal with the CRA. For more information, see the Taxpayer Bill of Rights.

You may provide compliments or suggestions, and if you are not satisfied with the service you received:

  1. Try to resolve the matter with the employee you have been dealing with or call the telephone number provided in the correspondence you received from the CRA. If you do not have contact information, go to Contact the Canada Revenue Agency.
  2. If you have not been able to resolve your service-related issue, you can ask to discuss the matter with the employee’s supervisor.
  3. If the problem is still not resolved, you can file a service-related complaint by filling out Form RC193, Service Feedback. For more information and to learn how to file a complaint, go to Submit service feedback.

If you are not satisfied with how the CRA has handled your service-related complaint, you can submit a complaint to the Office of the Taxpayers' Ombudsperson. 

Reprisal complaints

If you have received a response regarding a previously submitted service complaint or a formal review of a CRA decision and feel you were not treated impartially by a CRA employee, you can submit a reprisal complaint by filling out Form RC459, Reprisal Complaint.

For more information, go to Objections, appeals, disputes, and relief measures.

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