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🇨🇦 CRA 2026 Form T1161 / T1243 / T1244 Framework

Canada Departure Tax & Deemed Disposition Guide 2026

Understand the Canadian deemed-disposition rules when emigrating, including Section 128.1, Form T1161, Form T1243, Form T1244, the short-term-resident exception, payment deferral and the rules that apply if you return to Canada.

1. What Is the Canadian Deemed Disposition?

When an individual ceases to be resident in Canada for income-tax purposes, subsection 128.1 of the Income Tax Act generally deems the individual to have disposed of certain property at its fair market value immediately before departure and to have immediately reacquired the property at the same amount. This can produce a capital gain or loss commonly called departure tax.

Key Framework Highlights:
  • The deemed disposition is a tax-law event; the taxpayer does not have to sell the property for the gain to arise.
  • The rule generally applies to most property, but numerous statutory exclusions exist.
  • The deemed disposition occurs immediately before the individual ceases Canadian tax residency.
  • The tax result depends on the property's adjusted cost base, FMV, capital-loss position and the applicable capital-gains rules.
  • Departure tax is separate from the question of whether the individual actually became a non-resident; the residency determination comes first.
Action Checklist:
  • Determine the actual date Canadian tax residency ended.
  • Review residential ties and any applicable income-tax treaty.
  • Inventory worldwide property on the departure date.
  • Identify property excluded from the deemed-disposition regime.
  • Obtain reliable FMV evidence for property subject to the rule.
  • Calculate the applicable capital gains and losses.
  • Complete the required departure forms and return.

2. Which Property Is Excluded from the Departure Deemed Disposition?

CRA identifies a substantial list of property that is not subject to the normal departure deemed disposition. The exclusions should be applied according to the statutory definition rather than by using a simple 'Canadian versus foreign asset' rule.

PropertyNormal Deemed DispositionGeneral Treatment
Canadian real or immovable propertyNoExcluded; Canada can generally tax a later actual disposition
Canadian resource propertyNoExcluded under the statutory rule
Timber resource propertyNoExcluded under the statutory rule
Canadian business property connected with a Canadian permanent establishmentNoExcluded while the statutory conditions apply
RRSP / RRIF and specified pension interestsGenerally noSpecified registered and pension interests are excluded
TFSANoExcluded from the normal deemed disposition
RESP / RDSP and other listed registered or employee-plan interestsGenerally noSpecified rights and interests are excluded under the statutory definition
Foreign shares, securities and investment propertyGenerally yesCan be subject to deemed disposition unless another exclusion applies
Foreign real propertyGenerally yesCan be subject to deemed disposition unless a specific exclusion applies
Private-company sharesGenerally yesFMV can create a deemed capital gain or loss; valuation may be required

3. Form T1161 and the $25,000 Threshold

Form T1161, List of Properties by an Emigrant of Canada, is required when the applicable property owned at the time of departure has a total fair market value of more than $25,000 after applying the CRA's specified exclusions.

Key Framework Highlights:
  • The test is more than $25,000, not simply $25,000 or more.
  • The threshold is applied after the specified exclusions.
  • T1161 lists the applicable property and includes information such as description, location, FMV and other requested details.
  • CRA says Form T1161 must be filed by the applicable filing due date even when the taxpayer otherwise does not have to file a tax return.
ItemT1161 Treatment
Relevant reportable propertyIncluded in determining whether the $25,000 threshold is exceeded
Cash and deposits of legal Canadian tenderExcluded
Pension and similar rights/interestsExcluded where covered by CRA's rules
Personal-use property with FMV below $10,000 per itemExcluded under the stated T1161 rule
Certain property owned when the taxpayer last became resident or inherited afterwardCan be excluded where the short-term-resident conditions are satisfied

4. Short-Term Resident Exception

A special exception can exclude certain property from the departure deemed disposition and T1161 calculation for an individual who was resident in Canada for 60 months or less during the 10-year period before emigrating. The property must meet the additional statutory conditions.

ConditionRequirement
TaxpayerMust be an individual rather than a trust
Residence periodResident in Canada for 60 months or less during the 10-year period before emigration
PropertyProperty owned when the individual last became resident in Canada or property inherited afterward
Taxable Canadian propertyThe exception does not apply to property that is taxable Canadian property

5. Form T1243: Calculating the Deemed Disposition

Form T1243, Deemed Disposition of Property by an Emigrant of Canada, is completed when an individual ceases Canadian tax residency and is deemed to have disposed of certain property. It calculates the applicable deemed gains and losses that flow into the departure-year tax return.

6. 2026 Capital-Gains Inclusion Rate

The current page should not present a two-thirds capital-gains inclusion rate as enacted 2026 law. CRA states that it reverted to administering the currently enacted one-half inclusion rate after the proposed change was not enacted. The inclusion rate is not itself a tax rate.

Key Framework Highlights:
  • The currently administered general capital-gains inclusion rate is one-half.
  • A 50% inclusion rate means one-half of the applicable capital gain is included in taxable income; it does not mean that the capital gain is taxed at 50%.
  • The actual income-tax result depends on taxable income, federal and provincial or territorial tax rates, capital losses and any applicable exemptions or special provisions.
  • The previously proposed increase to two-thirds should not be presented as a current enacted 2026 rule.

7. Deferring Departure Tax with Form T1244

A taxpayer can elect to defer payment of tax arising from income relating to the deemed disposition of property. CRA's current form is Form T1244, Election under subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property.

IssueCurrent Rule
Correct formForm T1244
AvailabilityThe election can generally be made regardless of the amount of tax owing
DeadlineGenerally April 30 of the year after emigration
Federal security thresholdAdequate security is required when federal tax owing on the deemed-disposition income is more than $16,500
Former Quebec residentsCorresponding CRA threshold is more than $13,777.50
Provincial/territorial securityCRA may also require security for applicable provincial or territorial tax
InterestDeferred tax can generally be paid later without interest if the statutory deferral requirements continue to be met

8. Form T1161 Late-Filing Penalty

CRA imposes a specific penalty for failing to file Form T1161 by the applicable due date.

Penalty ComponentAmount
Daily penalty$25 per day late
Minimum penalty$100
Maximum penalty$2,500

9. Departure-Year Return and Filing Deadlines

The departure-year tax return and required information forms must be filed by the applicable due dates. April 30 is the normal individual return deadline, but taxpayers with self-employment income can have a June 15 filing deadline; any balance of tax for the preceding year is generally due April 30. Form T1161 itself must be submitted by the applicable return filing due date.

SituationTypical Filing Deadline
Individual emigrant without self-employment filing extensionGenerally April 30 of the following year
Individual emigrant with qualifying self-employment incomeGenerally June 15, although any balance of tax is generally due April 30
Form T1161By the applicable filing due date for the return
Form T1244 deferral electionGenerally April 30 of the year after emigration
Action Checklist:
  • Enter the correct departure date on the T1 return.
  • Determine whether the self-employment filing deadline applies.
  • File T1161 by the applicable deadline when required.
  • Complete T1243 if deemed dispositions apply.
  • File T1244 by its specific deadline if deferring tax.
  • Arrange security with CRA before the applicable deadline when the security threshold is exceeded.

10. Registered Plans and Tax-Free Savings Accounts

Registered plans and specified pension interests are among the important statutory exclusions from the normal departure deemed disposition. This does not mean that all future withdrawals or foreign-country taxation are ignored.

AssetDeparture Deemed DispositionAfter Becoming Non-Resident
RRSPGenerally excludedCan remain in place; non-resident withdrawals are generally subject to Canadian withholding, normally 25% unless a treaty reduces it
RRIFGenerally excludedPayments to a non-resident are generally subject to Part XIII withholding, subject to treaty relief
TFSAExcludedCan generally be retained, but non-residents cannot contribute and new contribution room does not accrue
RDSPExcluded from the normal deemed dispositionSeparate contribution, withdrawal and government-incentive rules apply
RESPExcluded from the normal deemed dispositionSeparate registered-plan rules continue to apply

11. Canadian Real Estate After Emigration

Canadian real or immovable property is excluded from the normal departure deemed disposition, but Canada continues to have taxing rights over the property. A later sale by a non-resident can be subject to Canadian tax and special non-resident compliance and withholding rules.

Key Framework Highlights:
  • Canadian real estate is not included in the normal departure deemed disposition.
  • The later disposition of Canadian taxable property can still be taxable in Canada.
  • Non-resident sellers may be subject to the section 116 compliance and withholding regime.
  • The principal residence exemption is a separate question and should not be confused with departure-tax exclusion.

12. What Happens If You Return to Canada?

Returning to Canadian tax residency does not automatically mean that a previous departure tax is reversed or that every asset automatically receives a new FMV cost base. CRA provides a specific election to 'unwind' a previous deemed disposition where the statutory conditions are met.

QuestionCurrent CRA Rule
Who can use the unwind election?A person who ceased Canadian residency after October 1, 1996 and later re-establishes Canadian residency for income-tax purposes, subject to the applicable conditions
Must the property still be owned?Yes; the taxpayer must still own some or all of the property to which the election relates
Taxable Canadian propertyThe election can reduce the previously reported gain by a specified amount, subject to the statutory limits
Other propertyThe reduction is limited using the previously reported gain, the FMV on return to Canada and the applicable statutory amount
DeadlineWritten election request must generally be made by the filing due date for the year residency is re-established

13. Departure Tax and Foreign Assets

Foreign property is often the focus of departure-tax planning because it can fall within the deemed-disposition regime. The tax is based on the Canadian tax treatment of the property at the departure date, not on whether the destination country taxes the same unrealized gain.

Foreign AssetTypical Departure-Tax Treatment
Public sharesGenerally subject to deemed disposition if not excluded
ETFs and mutual fundsGenerally subject to deemed disposition if held as property within the regime and not excluded
Foreign private-company sharesGenerally subject to deemed disposition; reliable FMV valuation may be required
Foreign real estateGenerally subject to deemed disposition unless an applicable exception applies
Crypto-assetsCan be subject to deemed disposition; tax characterization must be determined first
Action Checklist:
  • Document ownership and tax basis before departure.
  • Obtain reliable FMV evidence for private or illiquid investments.
  • Identify foreign-currency conversion methodology.
  • Check whether the short-term-resident exception applies.
  • Determine whether a foreign country will also tax the departure event.
  • Review any foreign tax credit or treaty consequences where foreign tax is actually imposed.

14. Complete 2026 Departure-Tax Roadmap

A proper departure-tax analysis begins with residency and then works through the statutory property exclusions, information returns, deemed-disposition calculation and payment options.

15. Common Departure-Tax Mistakes

The most serious errors come from treating departure tax as a simple 25% or 50% calculation and overlooking the statutory exceptions and residency rules.

Action Checklist:
  • Assuming that leaving Canada physically automatically ends tax residency
  • Treating all worldwide assets as subject to the deemed disposition without checking exclusions
  • Calling Canadian real estate 'tax-free' after emigration
  • Using the wrong departure-tax deferral form
  • Using $14,500 as the current Quebec security threshold
  • Calling 50% the departure-tax rate instead of the capital-gains inclusion rate
  • Treating the short-term-resident exception as applying to every asset acquired before departure
  • Forgetting the 10-year measurement period in the short-term-resident rule
  • Ignoring the $10,000 personal-use-property exclusion relevant to T1161
  • Treating T1161 and T1243 as interchangeable forms
  • Assuming the T1161 threshold applies to the gross value of every asset owned
  • Assuming returning to Canada automatically reverses departure tax
  • Failing to document FMV at the departure date
  • Ignoring post-emigration Canadian tax on taxable Canadian property
  • Assuming a TFSA remains tax-free in the new country
  • Failing to consider treaty and foreign-country consequences of the deemed disposition

Frequently Asked Questions

When you cease Canadian tax residency, subsection 128.1 generally deems you to have disposed of certain property at fair market value immediately before departure and reacquired it at the same amount. The resulting capital gain or loss can create departure tax.

Form T1161 is generally required when the total fair market value of the relevant reportable property you own at departure is more than $25,000 after applying the CRA's specified exclusions. The form must be filed by the applicable filing due date.

An individual who was resident in Canada for 60 months or less during the 10-year period before emigrating can, subject to the other statutory conditions, exclude certain property that they owned when they last became resident or inherited afterward. The exception does not apply to taxable Canadian property.

The current CRA form is T1244, Election under subsection 220(4.5) of the Income Tax Act. The election is generally due by April 30 of the year after emigration. Adequate security is required when federal tax arising from the deemed-disposition income exceeds $16,500, or $13,777.50 for former Quebec residents.

They are generally excluded from the normal departure deemed disposition. However, future RRSP/RRIF withdrawals can be subject to Canadian non-resident withholding, TFSA contributions while non-resident can trigger tax, and the destination country may apply its own tax rules.

Returning to Canada does not automatically reverse the departure tax or automatically reset every asset's cost base. If you still own qualifying property, CRA permits an unwind election for certain previous deemed dispositions when the statutory conditions are met. A separate analysis of the return-to-Canada deemed-acquisition rules may also be required.

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2026 Deemed Disposition Metrics

  • Main Statutory Rule
    Income Tax Act subsection 128.1
  • T1161 Threshold
    More than $25,000 of relevant property FMV
  • Departure Calculation
    Form T1243 deemed dispositions
  • Tax Deferral
    Form T1244 under subsection 220(4.5)

Related Tax Tools

Departure Tax Leaving Canada Guide→Form NR73 Residency Determination Guide→Canada Capital Gains Tax 2026 Guide→

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