If you co-signed a mortgage to help your child buy a home and were added to the property title purely for financing purposes (without having real beneficial ownership), you have likely created a “bare trust.” Under rules enacted under federal Bill C-15, such family-related principal residence title arrangements are completely and permanently exempt from filing an annual T3 Trust Return and Schedule 15. Furthermore, the CRA has permanently waived bare trust reporting requirements for the 2023, 2024, and 2025 tax years, meaning no retroactive filing or late-filing penalties apply.
The Canadian housing market remains incredibly expensive, especially in major urban centres like Toronto, Vancouver, and Halifax . To help their children enter the real estate market, many parents step in to co-sign the mortgage. Because banks often require all individuals on the mortgage to also be listed on the property’s legal title, parents unknowingly entangle themselves in complex federal tax laws.
When a parent holds legal title to a property but all the benefits and risks (like paying the mortgage, living in the house, and keeping the profit upon sale) belong strictly to the child, a “bare trust” is formed 📍. While the federal government previously introduced rules requiring bare trusts to file annual tax returns, the law was dramatically simplified. Following the passage of Bill C-15 in March 2026, the Canada Revenue Agency (CRA) has permanently exempted common family-related principal residence title arrangements. This means most parents who co-sign a mortgage for their children are completely relieved of these reporting obligations.
Understanding the Evolution of Bare Trust Reporting Rules
The rules surrounding bare trusts in Canada have undergone significant changes, shifting from widespread reporting requirements to sweeping exemptions for families. Here is the timeline and current reality of how the CRA handles these arrangements.
Step 1: The Initial Rollout and Mass Confusion
In 2023, the federal government introduced aggressive reporting requirements aimed at bare trusts, which include arrangements where a parent holds legal title to a property but holds no beneficial interest. Under those original rules, parents who co-signed a mortgage and were placed on the title purely to help their child secure financing were suddenly deemed “trustees” of a bare trust, triggering mandatory tax filings.
Step 2: The Original Requirements (T3 and Schedule 15)
Under the initial rules, bare trustees were required to register for a Trust Account Number (starting with a “T”) and file an annual T3 Trust Income Tax and Information Return along with a complex new form called Schedule 15 (Beneficial Ownership Information of a Trust). 🤝 This required disclosing sensitive personal data-including names, addresses, and Social Insurance Numbers (SINs)-for every parent and child involved in the home-buying arrangement.
Step 3: The Complete Retroactive Exemptions
Recognizing the immense administrative burden and confusion these rules placed on ordinary families, the CRA stepped back. The agency permanently exempted bare trusts from filing a T3 return and Schedule 15 for the 2023, 2024, and 2025 tax years. If you co-signed a mortgage during these years, you do not need to file anything retroactively, and there is no threat of late-filing penalties.
Step 4: Permanent Relief Under Bill C-15
In March 2026, the federal government permanently resolved this issue by passing Bill C-15 (receiving Royal Assent on March 26, 2026). ⚠️ Effective starting with the 2026 tax year, Bill C-15 introduced a permanent statutory exemption for “principal residence title arrangements” between related persons. This means parents co-signing a mortgage for their child’s main home are legally and permanently exempt from registering a trust, filing a T3 return, or submitting Schedule 15.
Understanding Legal Title vs. Beneficial Ownership
The entire concept of a bare trust relies on separating who is on paper versus who actually owns the asset.
| Concept | The Parent (Trustee) | The Child (Beneficiary) |
|---|---|---|
| Legal Title | Name is listed on the provincial land registry. | Name is also listed on the provincial land registry. |
| Financial Burden | Co-signed debt, but pays no daily expenses. | Pays the mortgage, hydro, and property taxes. |
| Capital Gains / Profit | Receives $0 upon sale. | Receives 100% of profit (Principal Residence). |
How Much Are the Penalties and Costs?
While the CRA previously proposed severe penalties for failing to report bare trusts, these no longer threaten families who co-signed a home mortgage. Under the original guidelines, the penalty risk was substantial:
- Historical Late Filing Penalty: $25 CAD per day up to $2,500 CAD per year.
- Gross Negligence Penalty: The greater of $2,500 CAD or 5% of the property’s highest value (which would be $50,000 CAD on a $1 million home).
- Current Filing Cost: Thanks to the permanent exemptions under Bill C-15, parents-co-signers pay $0 CAD in filing fees and do not need to hire an accountant to prepare a T3 or Schedule 15 return.
How Long Does the Process Take?
Because family co-signing arrangements are permanently exempt, the timeline for compliance has been simplified.
- Active Registration & Filing: Requires 0 days. You are completely relieved of registering a trust account number or filing annual returns.
- Past Years (2023-2025): The CRA has waived all filings for these years, meaning you have no backlog to clear and face no compliance review.
- Ending the Arrangement: When your child is eventually able to refinance the mortgage solely in their own name, you can be removed from the property title via your real estate lawyer.
Frequently Asked Questions (FAQ)
Do I have to pay capital gains tax when the house is sold?
Generally, no. Because you are only a bare trustee with no beneficial ownership, the sale of the house belongs entirely to your child. If it is their principal residence, they can claim the Principal Residence Exemption, and you owe no tax.
What if I am a joint tenant with my child?
Being a joint tenant on title does not automatically prevent a bare trust. The CRA looks at the reality of the arrangement (who pays, who benefits) to determine if a bare trust exists, regardless of the legal tenancy structure.
Are there any exemptions for bare trust reporting?
Yes. Following the passage of Bill C-15 in March 2026, there is now a permanent statutory exemption specifically for “principal residence title arrangements” among related persons (such as a parent co-signing a mortgage for a child). This means family-related home titles are completely excluded from reporting, regardless of the property’s value.
What if we didn’t file for past years?
You do not need to do anything. The CRA has officially waived bare trust reporting for the 2023, 2024, and 2025 tax years. You do not need to file any retroactive T3 returns or Schedule 15, and there is absolutely no penalty exposure or need to apply for voluntary disclosure.
Do we still need a CPA or tax lawyer to manage this?
No, not for reporting purposes. Because Bill C-15 permanently exempted family principal residence title arrangements from bare trust reporting, you do not need to hire a CPA or tax lawyer to file annual T3 trust returns or register trust numbers for this arrangement.
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