Leaving Canada for the US: The Departure Tax Guide (2026)

When Canada considers you gone

Departure tax is triggered when you cease to be a resident of Canada for tax purposes. Tax residency is not the same as immigration status: you can keep your Canadian passport and still be a non-resident for tax, or hold no status and still be a resident.

The CRA looks at your residential ties:

• Primary ties — a home in Canada, a spouse or common-law partner in Canada, dependants in Canada. Keeping any one of these usually keeps you resident.
• Secondary ties — personal property (car, furniture), social connections, a Canadian driver's licence, Canadian bank accounts and credit cards, provincial health insurance, club memberships. No single secondary tie decides it, but several together do.

If you move to the US, sell or give up your Canadian home, your spouse and kids move with you, and you cut the secondary ties, you become a non-resident on the day you leave. If you are unsure, you can ask the CRA for a determination by filing Form NR73 (Determination of Residency Status — Leaving Canada). It is optional, but the CRA's written opinion is valuable protection if your departure date is ever questioned. Note the timing: your departure date is the day after your last day as a resident, and it goes on page 1 of your final T1 return.

One trap for the year you leave: if you sojourn in Canada for 183 days or more in a calendar year, you are deemed a resident for that whole year. Short-term movers who shuttle back and forth should count their days.

The deemed disposition: how departure tax works

Under section 128.1(4)(b) of the Income Tax Act, immediately before you cease to be a resident, you are deemed to dispose of each property you own at its fair market value and to immediately reacquire it at that same value. You did not sell anything. The law just pretends you did, crystallizes the gains that accrued while you were a Canadian resident, and taxes them now — so Canada does not lose the tax when you cash out years later as a US resident.

The math is simple: capital gain = fair market value on departure date minus adjusted cost base (ACB). Only 50% of the gain is included in income for 2026 (the inclusion rate), and the included half is taxed at your marginal rate in the departure year.

What is caught: publicly traded shares, ETFs, mutual funds, bonds, cryptocurrency, foreign (non-Canadian) real estate, shares of private corporations, partnership interests, and personal-use property worth $10,000 or more (art, jewellery, collectibles).

What is exempt — no deemed disposition on:

• Real property situated in Canada (your Toronto condo is safe from departure tax, though it stays taxable in Canada when actually sold)
• Registered plans: RRSPs, RRIFs, TFSAs, RDSPs, RESPs
• Pensions, employee stock options, and certain trust interests
• Property used in a Canadian business (for a continuing business)

The exempt list is why the order of operations matters: maxing out your RRSP before you leave shelters assets from the deemed disposition entirely.

The three forms: T1243, T1161, T1244

Your final Canadian return (the "departure return") carries three possible attachments:

1. Form T1243 — Deemed Disposition of Property by an Emigrant of Canada. This is the calculation. For each property caught by the deemed disposition, you list the description, year of acquisition, ACB, fair market value on departure, and the resulting gain or loss. The gains flow onto Schedule 3 and into your T1.
2. Form T1161 — List of Properties by an Emigrant of Canada. Required when the total fair market value of all property you owned at departure exceeded $25,000. This is a disclosure list, not a tax calculation — it includes even exempt property like your Canadian real estate and RRSP. Miss it and the penalty is $25 per day, minimum $100, maximum $2,500 — even if you owe zero tax.
3. Form T1244 — the deferral election. Under subsection 220(4.5), you can elect to defer paying the departure tax until you actually sell the property. The election is made on or before your balance-due date for the departure year, and the deferred tax is interest-free until disposition. You must post acceptable security with the CRA for large amounts, and the election is unavailable for some property types — read the form's conditions carefully.

Your departure return is due April 30 of the year after you leave (June 15 if you or your spouse were self-employed, though any balance is still due April 30).

RRSPs, TFSAs, and other accounts on exit

RRSP/RRIF: No deemed disposition. Your RRSP crosses the border intact. But once you are a non-resident, withdrawals face 25% Canadian withholding tax under Part XIII (reduced to 15% for periodic RRIF payments under the Canada-US treaty — lump sums get no reduction). The US will also tax the withdrawal as ordinary income, with a foreign tax credit for the Canadian withholding. Do not collapse your RRSP in the departure year to "simplify" — you would pay full Canadian marginal rates plus lose the treaty benefit.

TFSA: Also exempt from deemed disposition, and it stays open. But two warnings: (a) contributions made while you are a non-resident attract a 1%-per-month penalty tax — stop contributing the day you leave; (b) the US does not recognize the TFSA, and treats it as a taxable foreign trust. Most cross-border practitioners advise filing Forms 3520/3520-A annually for a TFSA held by a US resident.

Non-registered accounts: Your ACB is stepped up to the departure-date FMV. Keep the T1243 — it is your proof of the new cost base if the IRS or CRA ever asks.

RESP: No deemed disposition, but if you are moving permanently, consider the timing of withdrawals: educational assistance payments to a non-resident beneficiary face 25% withholding.

The US side of the move

Canada's departure is only half the story. For the year you arrive:

• The US taxes you based on the substantial presence test (31 days in the current year and 183 weighted days over three years) or your green card. In the arrival year you may be a dual-status alien — resident for part of the year, non-resident for the rest — which restricts deductions and filing options.
• You can elect to be treated as a full-year US resident (the "first-year choice" or a joint election with a US-citizen spouse) to simplify filing, but run the numbers: it pulls your worldwide income into the US for the whole year.
• State taxes matter enormously. States like California are notoriously sticky about residency — sever state ties (driver's licence, voter registration, property) deliberately, or you may owe state tax long after you thought you left.
• Open a US bank account before you need one, and be ready for FBAR (FinCEN Form 114) if your non-US accounts exceed $10,000 in aggregate at any point in the year.

Provincial loose ends

Before you go: notify your province's health plan (for Ontario, contact ServiceOntario — your OHIP coverage ends when you cease to be a resident, and keeping it while living abroad can create problems). Cancel or convert your driver's licence on the US side within your new state's deadline. And tell your Canadian bank and brokerage you are now a non-resident — they are required to withhold 25% (or the treaty rate) on Canadian-source income paid to you, and your T5 slips stop.

A pre-departure checklist

1. 6–12 months out: get a cross-border tax review. Model the deemed disposition with real FMVs — the number is often bigger than people expect.
2. Before leaving: consider realizing losses to offset deemed gains, top up the RRSP, and stop TFSA contributions.
3. Departure date: document everything — lease end, moving receipts, one-way tickets, US lease. Your departure date is the single most litigated fact in residency disputes.
4. File NR73 if your situation is at all ambiguous.
5. File the final T1 with T1243/T1161 (and T1244 if deferring) by April 30.
6. In the US: track your substantial-presence days, file FBAR if needed, and get state residency sorted in the first month.

Departure tax is not a penalty for leaving — it is Canada collecting tax on gains that accrued while you benefited from Canadian residency. Handled early, it is a manageable one-time computation. Discovered after the fact, it comes with penalties, interest, and a much worse negotiating position.