Receiving a US Inheritance as a Canadian
A Canadian gets the call that an aunt in Arizona or a parent in Seattle has died and left them a share of the estate. The first worry is almost always tax: is the government — which government? — going to take a cut before it reaches them? For most people the answer is reassuring. Canada does not tax inheritances at all, and the US estate tax that exists is the estate's problem, not the beneficiary's, and usually nil. The real things to watch are narrower: inherited US retirement accounts and inherited US real estate.
This guide explains the tax picture for a Canadian inheriting from a US estate. It is general information, not advice; a cross-border accountant is worth the fee where US retirement accounts or real estate are involved.
No Canadian tax on receiving it
Start with the simplest point: Canada has no inheritance tax, so receiving money or property from a US estate is not taxed in your hands in Canada.[1] You might owe Canadian tax later — on income the inheritance earns once it is yours, or on a future gain if you sell inherited property — but the act of inheriting is tax-free on the Canadian side.
US estate tax is the estate's problem
On the US side, US estate tax is a liability of the deceased's estate, settled before anything is distributed — not a tax on the beneficiary.[2] And because US citizens and residents have a very large estate-tax exemption, the great majority of US estates pay no US estate tax at all. In the typical case, the Canadian beneficiary simply receives their share, with the US tax question already resolved (or moot) at the estate level.
The inherited-IRA catch
Here is the one that surprises people. Inheriting a US retirement account such as an IRA is taxable as income when the money is withdrawn, both in the US and in Canada. The Canada–US treaty and foreign tax credits relieve the double taxation, but a large lump-sum withdrawal can still produce a meaningful tax bill, and the timing and method of withdrawal materially affect the result. If you inherit a US registered account, get cross-border tax advice before withdrawing.
Inherited US real estate
If you inherit US real estate, you generally take it at its fair market value at the date of death, which becomes your cost base for a future sale. The property is US-situs, so a later sale can trigger US capital gains tax alongside Canadian capital gains, with foreign tax credits to relieve the overlap. Note that inheriting the property itself is not what triggers US withholding — it is a later sale: as a Canadian, you're a "foreign person" for US purposes, so the buyer must generally withhold 15% of the gross sale price under FIRPTA and remit it to the IRS.[4] That withholding is a prepayment against your actual US tax on the sale, not an extra tax — it's refundable to the extent it exceeds what you actually owe, and it can often be reduced in advance with an IRS withholding certificate. Holding US real estate also has implications for your own future estate — see the Canada–US tax treaty and US estate tax.
Bringing the money to Canada
An inheritance of cash or securities can generally be brought to Canada without Canadian tax on the inheritance itself. You will convert it to Canadian dollars, and your bank may request documentation of the source of funds for a large transfer, so keep the US estate paperwork confirming it is an inheritance. Going forward, any income the inherited assets earn is taxable in Canada, and holding foreign assets over the reporting threshold can trigger foreign-property reporting.[3]
What we focus on at It's Simple Will
The Will Creator is for planning your own Canadian estate; a US inheritance you receive is mostly a cross-border tax question, and our guides aim to flag the few pieces — IRAs, US real estate — that genuinely need a specialist. For inheritances from other countries, see foreign inheritance for Canadians.
Related guides
Citations & sources
- [1]P113 — Gifts and Income Tax (inheritances not taxed in the recipient's hands) — Canada Revenue Agency
- [2]Some nonresidents with US assets must file estate tax returns (US estate tax is the estate's liability) — Internal Revenue Service (US)
- [3]Doing taxes for someone who died — Canada Revenue Agency
- [4]FIRPTA withholding (15% withholding on a foreign person's sale of a US real property interest) — Internal Revenue Service (US)
Frequently asked questions
Do I pay Canadian tax on a US inheritance?
Generally no. Canada has no inheritance tax, so receiving money or property from a US estate is not taxed in your hands in Canada. You may owe Canadian tax later on income the inheritance earns once it is yours, or on a future gain if you sell inherited property, but not on the act of receiving it.
Who pays US estate tax on a US inheritance?
The US estate, not you. US estate tax is a liability of the deceased's estate and is settled before distribution. Because US citizens and residents have a very large estate-tax exemption, most US estates pay no US estate tax at all, and the Canadian beneficiary simply receives their share.
What if I inherit a US IRA or other US retirement account?
That is the main tax trap. Inherited US retirement accounts are taxable as income when the money is withdrawn — in the US and in Canada — though the Canada–US treaty and foreign tax credits relieve double taxation. A large lump-sum withdrawal can produce a significant tax bill, so get cross-border advice on the timing and method of withdrawal.
What about inheriting US real estate?
You generally take it at its fair market value at the date of death, which becomes your cost base for a future sale. The property is US-situs, so a later sale can trigger US capital gains tax as well as Canadian capital gains, with foreign tax credits to relieve the overlap. Because you're a "foreign person" for US purposes, a later sale is also generally subject to 15% FIRPTA withholding on the gross sale price — a prepayment against your actual US tax, not an extra tax, and often reducible in advance. Holding US real estate also carries its own US estate-tax considerations for your own estate later.
How do I bring the money to Canada?
An inheritance of cash or securities can generally be transferred to Canada without Canadian tax on the inheritance itself. You will convert it to Canadian dollars, and your bank may ask for documentation of the source of funds for a large transfer. Keep the US estate paperwork showing it is an inheritance.
Do I have to report anything in Canada?
You do not report the inheritance itself as income. But if you end up holding foreign assets over the reporting threshold, foreign-property reporting can apply, and any income the inherited assets earn going forward is taxable in Canada. Keep records of the date-of-death values for anything you might later sell.