Money, tax and estate basics for downsizers
Last reviewed October 30, 2026
Downsizing often frees up money, and it raises questions about tax, estates and helping family. This page explains the main concepts in plain language so you know what to ask your accountant, lawyer and financial advisor. It isn't advice for your situation.
Selling your home: the principal residence exemption
In Canada, the gain on selling your principal residence is generally tax-free under the principal residence exemption, for the years you designate it as your principal residence (see the CRA guidance). A few points to know:
- You must report the sale on your income tax return for the year you sell, even if no tax is owing. Not reporting it can cause problems.
- A family unit (you and your spouse or common-law partner) can generally designate only one principal residence per year. If you also own a cottage, you may need to choose which property to designate for which years.
- If part of your home was rented out, or used for business, part of the gain may be taxable.
Buying your next home: land transfer tax
You'll pay Ontario land transfer tax on the purchase. London has no municipal land transfer tax. The first-time buyer refund generally won't apply if you've owned a home before. Budget for it, along with legal fees, when you calculate how much downsizing frees up.
Estate administration tax (probate)
When someone dies in Ontario, assets that pass through their estate may be subject to estate administration tax (often called probate tax). Ontario charges $15 for every $1,000 (or part of $1,000) of estate value over $50,000, with no tax on the first $50,000 (Ontario Ministry of Finance). A home that passes through the estate is usually included. Some people consider ways to reduce probate, such as joint ownership, but each has trade-offs.
Be careful with joint ownership
Adding an adult child to the title of your home, or putting a new home in joint names, can seem like a simple way to avoid probate. But it can have serious consequences:
- Your child's creditors, or a separating spouse, may have a claim on the property.
- You may need your child's signature to sell or refinance.
- There may be tax implications, including for the principal residence exemption.
- It can create disputes among siblings, and legal presumptions about whether the property was meant to be a gift.
Always get legal advice before changing how your home is owned.
Update your estate documents
A move is a good time to review:
- Your will, especially if it refers to a specific property.
- Powers of attorney for property and for personal care.
- Beneficiary designations on RRSPs, RRIFs, TFSAs and insurance.
- Where important documents are kept, so family can find them.
What to do with freed-up equity
If downsizing frees up money, a financial advisor can help you think about:
- Keeping an emergency fund and a cushion for future housing costs.
- Tax-efficient investing, for example using available TFSA room.
- How additional investment income may affect income-tested benefits such as the OAS recovery tax ("clawback") or the GIS.
- Helping family now versus later, and whether gifts should be documented.
Helping a child buy a first home? Many downsizers use some of their equity to help children with a down payment. Lenders have specific rules for gifted funds, and family law can affect how gifts are treated if a child's relationship ends.
Property tax relief
The City of London has offered property tax assistance programs for eligible low-income seniors and people with disabilities, and Ontario has offered tax credits such as the Ontario Energy and Property Tax Credit. Eligibility and amounts change, so check the City's website and the CRA.
Accessibility renovations
If you renovate to make a home safer or more accessible, federal tax credits such as the Home Accessibility Tax Credit may help with eligible expenses. A Multigenerational Home Renovation Tax Credit may apply when creating a secondary unit so a senior or an adult with a disability can live with a family member. Confirm current rules with the CRA.
Your professional team
- Real estate lawyer: the sale and purchase, and title questions.
- Estate lawyer: your will, powers of attorney, probate planning.
- Accountant: reporting the sale, tax planning.
- Financial advisor: investing freed-up equity, retirement income.
- Real estate agent: pricing your home and finding the next one.
Your local agent
A patient guide for a big decision
Selling a home you've lived in for decades and choosing the next one is as much an emotional decision as a financial one. It helps to work with someone who will take the time to explain your options without rushing you. We recommend Rayna Elabed, a Sales Representative with CENTURY 21 First Canadian Corp., Brokerage in London. She works with sellers on pricing and marketing, and with buyers on finding the right next home.
You can browse current London listings, including bungalows and condos, and contact Rayna directly through her CENTURY 21 page.