Did You Or A Family Member Cosign For A Mortgage? Trust Return Reporting May Be Required
New trust reporting requirements came into effect for the 2023 tax year which will have consequences for a variety of people who may not be aware of the need to file. Filing of the trust return is due April 2nd 2024 and there are huge penalties for not filing on time.
Below are some scenarios where a bare trust may come into effect and trust reporting is therefore required:
- A parent cosigned with their child on a mortgage, purely for the purpose of the child qualifying for the mortgage. The parent may only own 1% of the property for tax reasons.
- A parent or grandparent jointly owns a bank or investment account with a child or grandchild
- Estate planning reasons – A child is a joint owner on home or investment account to make estate planning easier when their parent passes away
Who Has To File A Trust Return:
- If you’re a joint owner of an asset, where you’re not the beneficial owner of the asset, then typically a bare trust is in effect, and that individual has to file a trust return. Eg. A parent that helps a child get a mortgage, and is a joint owner of the home, but doesn’t get the benefit, has to file the trust return. The child does not have to file the trust return in this case.
If you’re a joint owner of an asset, where you’re not the beneficial owner of the asset, then typically a bare trust is in effect, and that individual has to file a trust return. Eg. A parent that helps a child get a mortgage, and is a joint owner of the home, but doesn’t get the benefit, has to file the trust return. The child does not have to file the trust return in this case.
More information can be found on the Canadian Government website below:
New trust reporting requirements for T3 returns filed for tax years ending after December 30, 2023
The above information does not constitute tax advice.
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