Helping Your Child Buy Their First Home

Buying a first home is a major milestone—and many families step in to help by offering funds, co-ownership, or legal and tax guidance. Those gestures come from a good place, but they can also create complex issues if not handled carefully.

Here’s a clear look at the main legal and tax points families should consider to make that support effective and protective of your wealth over time.

Tax and Transfer Costs to Keep in Mind

Before structuring any help, it’s crucial to understand the kinds of taxes and costs that can arise in real estate transactions (especially in British Columbia).

• Property Transfer Tax (PTT): In BC, the buyer pays this at closing, based on the fair market value of the property. As a reference, on a $3 million property it could be ~$68,000. Also, a 20% additional tax applies to foreign buyers under certain rules. 

• Vacancy / Unoccupied Home Taxes: Multiple regimes (federal, provincial, municipal) may impose taxes on homes that are underused or vacant. Each regime has its own rules, exemptions, and filing obligations—even if the home isn’t generating income.

• Anti-Flipping Rules: At the federal level, profit from homes sold within 12 months may be deemed business income (unless specific life events apply). In BC, a new flipping tax (introduced in the 2024 budget) applies to gains on properties resold within two years, though there are exemptions. 

• Principal Residence Exemption: If your child lives in the property as their primary home, this exemption can reduce or eliminate capital gains tax—but the above rules and ownership structure decisions can affect eligibility. 

Because these taxes could erode the benefits you intend to deliver, early planning is essential.

How to Hold Title: Joint Tenancy vs. Tenancy in Common

When parents and children co-own a home, the way title is structured carries different legal consequences.

Joint Tenancy: Each co-owner holds equal interest and the right of survivorship applies: when one dies, their share passes automatically to the other.

• Pros: avoids probate for that share.

• Cons: less flexibility in estate planning; might conflict with broader family intentions. 

Tenancy in Common: Owners can hold unequal shares. Each person’s share can pass under their Will.

• Pros: more control, especially when contributions differ.

• Cons: the interest is subject to probate or estate administration processes. 

No matter which structure is chosen, it’s wise to have a co-ownership agreement that spells out who pays what, what happens if someone wants to sell, or how to handle unforeseen events (e.g. disability, death). 

Family Law Risks: What Happens in a Separation?

Even well-intentioned parental support can become contentious in a divorce or separation scenario. British Columbia’s Family Law Act treats gifts and inheritances as “excluded property” in many cases—meaning they’re usually not divided upon separation. 

However, there are important caveats:

• If the gift is not made directly to the child alone (e.g. made to the child and their spouse jointly)

• If the funds were deposited into joint accounts with the child’s spouse

• If those funds were used to buy jointly owned property without clear documentation

In such cases, the “gift” status may be challenged. To help preserve excluded property status, it’s wise to:

• Document the gift clearly to your child alone (not jointly with their spouse).

• Consider structuring the support as a loan, with a formal agreement (terms, repayment, optional security).

• Encourage the child to use a cohabitation or marriage agreement with their partner to clearly define what is and isn’t part of joint property. 

Gifts vs Loans: Which Is Better?

Parents often wrestle with whether to give money outright or lend it. Each option has pros and cons:

Gifts

• Simple, straightforward.

• May avoid mortgage lender issues.

• But risk being considered family property (if not properly documented) or losing protection in family law disputes.

 Loans

• Provide clearer legal footing and enforceability.

• But they can reduce your child’s borrowing capacity (lenders may demand the loan be excluded or subordinated).

• Informality is dangerous—without documentation, unenforceable.

• In both cases, consistency and clear documentation matter most. A casual, undocumented arrangement can be challenged. 

Rental Income, Roommates, and Short-Term Rentals

If your child plans to have roommates or rent out part of the property—either long-term or short-term via platforms like Airbnb—additional tax and regulatory obligations kick in.

• Rental Income Reporting: Must be declared on a T776 (or equivalent) under Canadian tax law. Some expenses (e.g. utilities, maintenance) may be deductible, but that can affect the principal residence exemption. 

• Short-Term Rentals: Local bylaws, zoning, licensing, and usage rules need to be checked. The federal government has also introduced rules limiting deductions for short-term rentals. 

• Loans Secured Against Income-Producing Properties: If parents provide a loan to the child and secure it using the income-producing home, that structuring needs extra care. 

Adding the Child to the Parents’ Title:
Proceed with Caution

Some consider simply adding their child to their existing home title (to avoid probate or simplify succession). But this step carries significant risks:

• Creditor / Spousal Exposure: The child’s share can be subject to their creditors or spouse claims. 

• Tax Triggers: A deemed disposition under Canadian tax law could lead to capital gains. Also, the principal residence exemption might be partially lost if the child doesn’t physically live in the home. 

• Loss of Control: Once ownership is shared, reversing the change can get complicated, costly, and messy. 

Alternatives like bare trusts or carefully structured transfers via your Will may offer less risky paths. 

Estate Planning: Thinking Ahead

Your support decision should feed into your larger estate plan. Some key considerations: 

• Unequal Gifts: If one child gets help buying a home and others don’t, your Will may need to equalize to avoid claims under the Wills, Estates and Succession Act. 

• Loan Forgiveness on Death: Define whether the loan should be repaid, forgiven, or treated as an advance on inheritance.

• Encourage Your Child to Plan Too: Owning a home adds complexity. They should have a Will and Power of Attorney so that in case of incapacity or death, the home is properly managed. 

Final Thoughts

Helping your child purchase their first home can be one of the most memorable and meaningful gifts you make—and with thoughtful structuring, it doesn’t have to cause unintended problems.

Whether you go with a gift, loan, or co-ownership, make sure the structure reflects your family’s priorities: minimizing tax costs, safeguarding against family law exposure, and preserving your estate plan. Consulting a legal or tax advisor early can make all the difference.

Province / Territory — Transfer tax snapshot 

Source: From respective provincial government’s website