Canada has no inheritance tax, so you do not pay capital gains tax on an inherited house in Ontario simply for receiving it. Tax is settled on the deceased person's final return instead, and your cost base resets to the home's market value on the date of death, so only growth after that date can create a gain for you.
The mechanism is a deemed disposition. Under the Income Tax Act, someone who dies is treated as having sold every capital property at fair market value immediately before death. Where the house was their principal residence for every year they owned it, that deemed sale is generally sheltered by the principal residence exemption and no tax results. Where it was a rental, a cottage, or a second property, the accrued gain becomes taxable on that final return, with half of it included in income. The federal inclusion rate remains 50% after the proposed increase to two thirds was cancelled in March 2025.
One large exception overrides the deemed sale. Property passing to a surviving spouse or common-law partner resident in Canada, or to a qualifying spousal trust, rolls over at its adjusted cost base. No gain arises at that moment. It travels with the survivor and surfaces later, on a sale or on their own death. A home held in joint tenancy also passes automatically by right of survivorship, which is one reason how title was registered shapes the tax outcome as much as the will does.
Once the property sits in the estate, other costs come into view. Ontario's Estate Administration Tax applies when the trustee seeks a certificate of appointment, with nothing owing on the first $50,000 of estate value and $15 charged for every $1,000 above that. Appreciation between the date of death and the eventual sale counts separately as a capital gain. A graduated rate estate can generally claim the principal residence exemption for roughly a year after death, though once that window closes the growth is usually taxable. Everything else about selling a house after someone dies in Ontario runs on the court's timeline rather than the market's.
A dated appraisal earns its fee early. That single value fixes the estate tax calculation and the cost base every later figure is measured against. Reconstructing it two years on rarely satisfies the Canada Revenue Agency, and a beneficiary without one can end up taxed on gains that accrued before they owned anything.
Related reading: How Do You Sell a House After Someone Dies in Ontario?, Do You Pay Capital Gains Tax Selling Your Ontario Home?, and Joint Tenancy vs Tenancy in Common in Ontario.