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🇨🇦 CRA 2026 Emigration & Departure Tax Framework

Canada Departure Tax & Leaving Canada Guide 2026

Understand Canada's Section 128.1 deemed-disposition rules when you leave Canada, including tax residency, T1161, T1243, T1244 deferral, excluded assets, security requirements and what happens after emigration.

1. What Is Canada's Departure Tax?

When an individual ceases to be resident in Canada for income tax purposes, subsection 128.1 of the Income Tax Act generally deems the person to have disposed of certain property at fair market value (FMV) immediately before becoming a non-resident and to have immediately reacquired that property at the same FMV. The resulting capital gain or loss may create what is commonly called departure tax. The rule does not apply to every asset, and tax residency must first be determined using the applicable residency rules and, where relevant, an income tax treaty.

Key Framework Highlights:
  • Departure tax is generally a deemed disposition, not an actual sale: tax can arise even though the asset remains in the taxpayer's ownership.
  • The deemed disposition generally occurs when Canadian income-tax residency ends.
  • The regime primarily affects property covered by subsection 128.1; specific excluded property is not subject to the normal deemed-disposition rule.
  • Canadian taxable property that is excluded from the departure deemed disposition can remain subject to Canadian tax after emigration when it is actually disposed of.
  • A person who retains significant residential ties with Canada may not have ceased Canadian tax residency, so the first step is determining the actual departure date for tax purposes.
Action Checklist:
  • Determine your factual Canadian residency status and exact date of departure.
  • Review residential ties and any applicable Canadian income tax treaty.
  • Inventory worldwide property held on the departure date.
  • Identify property excluded from the deemed-disposition and T1161 rules.
  • Obtain defensible FMV evidence for property subject to deemed disposition.
  • Complete the required forms and report the deemed gains or losses on the departure-year return.

2. When Do You Become an Emigrant for Tax Purposes?

Leaving Canada physically does not automatically make you a non-resident for income-tax purposes. CRA generally considers an individual to be an emigrant when they leave Canada to live in another country and sever their residential ties with Canada. Depending on the facts, a person who keeps significant Canadian ties may remain a factual resident, while a treaty tie-breaker can result in deemed non-resident status.

SituationGeneral CRA treatmentWhy It Matters
Leave Canada and establish a permanent home abroad while severing significant Canadian residential tiesMay become an emigrant/non-resident on the appropriate departure dateDeparture-tax rules can apply
Maintain significant residential ties in CanadaMay remain a factual residentWorldwide taxation can continue
Resident of Canada and another treaty countryTreaty tie-breaker rules may determine residency statusMay become a deemed non-resident for Canadian tax purposes
Temporary absence without a genuine break in residential tiesMay remain residentDeparture tax may not be triggered at that time

3. Which Assets Are Subject to the Deemed Disposition?

The departure-tax regime generally applies to most capital property, but CRA lists substantial exceptions. The exact treatment should be determined asset by asset rather than by using a simple domestic-versus-foreign rule.

Asset CategoryNormal Departure Deemed Disposition?General Treatment
Publicly traded shares and securitiesGenerally yesFMV deemed disposition can create a capital gain or loss
Cryptocurrency and other crypto-assets held on capital accountGenerally yesA deemed disposition can create a capital gain or loss based on FMV; business-income treatment can apply where the activity is business
Foreign real estateGenerally yesGenerally subject to the deemed-disposition rules unless a specific statutory exception applies
Private-company sharesGenerally yesFMV valuation can be required and may create a deemed capital gain
Canadian real or immovable propertyGenerally noExcluded from the normal departure deemed disposition; Canada can generally tax an actual later disposition
Canadian business property used through a Canadian permanent establishmentGenerally noExcluded from the normal deemed-disposition rule under the statutory exception
RRSP/RRIF and other listed registered or pension interestsGenerally noExcluded rights/interests are not subject to the normal departure deemed disposition
TFSAGenerally noExcluded from departure deemed disposition; separate non-resident contribution and foreign-country tax issues can arise

4. Form T1161: Who Must File and What Is Excluded?

Form T1161, List of Properties by an Emigrant of Canada, is required when the total fair market value of the relevant property owned at departure is more than $25,000. The $25,000 test is not applied to every asset a person owns because CRA specifies exclusions from the calculation and from the list.

Key Framework Highlights:
  • The threshold is 'more than $25,000', not simply 'at least $25,000'.
  • Where Form T1161 is required, it is attached to the departure-year return.
  • Even if no income-tax return is otherwise required, CRA says Form T1161 must still be sent by the applicable filing due date.
  • The form has its own detailed instructions for what must be listed and which property is excluded.
ItemTreatment for the T1161 test
Cash and bank depositsExcluded
Pension plans and listed registered plansGenerally excluded under the CRA's listed exclusions
Certain property owned when the person last became resident, or inherited afterward, where the statutory short-residence condition is satisfiedCan be excluded subject to the detailed rules
Personal-use property with FMV below $10,000 per itemExcluded from the T1161 list calculation under CRA's stated rule
Other reportable property within the departure regimeIncluded in determining whether the $25,000 threshold is exceeded

5. Form T1243: Reporting the Deemed Disposition

Form T1243, Deemed Disposition of Property by an Emigrant of Canada, is used to calculate the capital gains and losses arising from property deemed disposed of when Canadian tax residency ends. The resulting gains or losses are carried to the appropriate Schedule 3 and the departure-year income-tax return.

6. 2026 Capital-Gains Inclusion Rate and Departure Tax

The supplied page's reference to a 50% / 66.67% 2026 inclusion range is outdated. The previously proposed increase to two-thirds was not proceeded with. Current Finance Canada and CRA materials confirm that the government decided not to proceed with the proposed partial capital-gains inclusion-rate change, and the currently administered individual capital-gains inclusion rate remains one-half (50%).

Key Framework Highlights:
  • The capital-gains inclusion rate is the portion of a capital gain included in taxable income.
  • The current enacted/administered rate is 50%, subject to the detailed capital-gains rules and any specific special rule that applies to a transaction.
  • The formerly proposed two-thirds individual inclusion-rate change should not be presented as current 2026 law.
  • Departure-tax calculations can also be affected by capital losses, available deductions, exemptions, special property rules and the taxpayer's other income.

7. Deferring Departure Tax: Form T1244

A taxpayer can elect to defer payment of tax arising from income relating to the deemed disposition of property. CRA currently identifies Form T1244, Election under subsection 220(4.5) of the Income Tax Act, as the form used for this deferral. The deferral does not apply to the deemed disposition of an employee benefit plan.

Deferral ItemCurrent CRA Rule
Deferral availableYes; election can defer payment of tax relating to the deemed disposition, regardless of the amount
Deferral formForm T1244
Election deadlineGenerally April 30 of the year after emigration
Federal-security thresholdIf federal tax owing on income from the deemed disposition is more than $16,500, adequate security is required
Former Quebec residentsThe corresponding CRA threshold is more than $13,777.50
Provincial/territorial securityCRA may also require security for applicable provincial or territorial tax
InterestThe deferred tax can generally be paid later without interest, provided the statutory deferral requirements remain satisfied

8. Form T1161 Late-Filing Penalty

CRA imposes a specific penalty when Form T1161 is not filed by the applicable due date. The penalty is $25 for each day the form is late, subject to a minimum of $100 and a maximum of $2,500.

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

9. Registered Plans: RRSP, RRIF and TFSA After Emigration

Registered plans are treated differently from ordinary investment property. RRSPs and RRIFs are among the rights and interests excluded from the normal departure deemed-disposition rule, but withdrawals while non-resident are generally subject to Canadian Part XIII withholding, normally 25% unless reduced by an applicable treaty.

PlanDeparture TaxAfter Becoming Non-Resident
RRSPGenerally excluded from departure deemed dispositionCan remain in place; withdrawals by non-residents are generally subject to 25% withholding unless a treaty reduces the rate
RRIFGenerally excluded from departure deemed dispositionPayments to non-residents are generally subject to Part XIII withholding, with treaty reductions possible
TFSAExcluded from normal departure deemed dispositionCan generally be kept, but non-residents cannot contribute and contribution room does not increase

10. Canadian Real Estate After Leaving Canada

Canadian real or immovable property is excluded from the normal departure deemed disposition. This does not mean that Canadian real estate becomes tax-free after emigration. Canada can continue to tax an actual disposition of taxable Canadian property, and non-resident sellers may have additional compliance and withholding requirements.

Key Framework Highlights:
  • A Canadian home is generally not subject to the departure deemed-disposition rule itself.
  • Selling Canadian real estate after becoming a non-resident can trigger Canadian tax because it is taxable Canadian property.
  • Section 116 procedures can apply to certain dispositions of taxable Canadian property by non-residents.
  • The principal residence exemption is a separate issue from departure-tax treatment and depends on the detailed principal-residence rules.

11. What Happens to Assets After Emigration?

After emigration, an asset that was subject to the deemed disposition is generally treated as having a new tax basis equal to its FMV at departure for purposes of the Canadian deemed-disposition framework. If the taxpayer elected to defer the departure tax and later disposes of the property, the deferred tax can become payable.

12. Returning to Canada and Unwinding a Previous Deemed Disposition

A former Canadian resident who later re-establishes Canadian residency can, in qualifying circumstances, elect to unwind some or all of a previous deemed disposition for property that is still owned. CRA refers to this as an election to unwind a previous deemed disposition.

Key Framework Highlights:
  • The election can apply when the taxpayer later re-establishes Canadian residency.
  • The taxpayer generally must still own some or all of the property that was deemed disposed of.
  • Different adjustment rules apply to taxable Canadian property and other property.
  • The election can reduce or eliminate Canadian tax attributable to the previously reported departure gain in qualifying circumstances.
  • A written request and property information must be provided by the filing due date for the year in which Canadian residency is re-established.

13. 2026 Departure Tax Filing Roadmap

Use the following roadmap when preparing to leave Canada. The exact filing obligations depend on the taxpayer's circumstances and departure date.

Action Checklist:
  • Establish the correct Canadian tax departure date.
  • Review residential ties and any applicable treaty tie-breaker.
  • Prepare a complete worldwide asset inventory.
  • Separate assets subject to deemed disposition from excluded assets.
  • Collect FMV evidence as of the departure date.
  • Calculate deemed capital gains and losses.
  • Complete Form T1243 where required.
  • Determine whether Form T1161 is required because the relevant property exceeds $25,000 in aggregate FMV after applicable exclusions.
  • Complete and attach Form T1161 when required.
  • File the departure-year T1 return and supporting schedules/forms by the applicable filing deadline.
  • Consider Form T1244 if payment deferral is needed.
  • If deferral is elected and federal tax exceeds the applicable threshold, arrange acceptable security with CRA.
  • Notify CRA of the departure date and update address/contact information.
  • Review post-emigration Canadian-source income and taxable Canadian property obligations.
  • Review the tax treatment of RRSP/RRIF withdrawals in the destination country and under the applicable Canadian treaty.
  • Do not contribute to a TFSA while non-resident.
  • Keep departure valuations and tax records for future dispositions or a possible return to Canada.

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 and immediately reacquired it at the same value. The resulting capital gain or loss can create departure tax, subject to the statutory exclusions and other applicable rules.

Generally no. Canadian real or immovable property is excluded from the normal departure deemed disposition. However, Canada can continue to tax an actual later sale of Canadian taxable property, and non-resident reporting and withholding rules can apply.

Form T1161 is generally required when the total fair market value of the relevant property you own at departure is more than $25,000 after applying the CRA's exclusions. It must be filed by the applicable departure-year return filing deadline.

The current CRA deferral form is Form T1244, Election under subsection 220(4.5) of the Income Tax Act, not Form T2080. The election generally must be made by April 30 of the year after emigration. If federal tax arising from the deemed disposition exceeds $16,500, adequate security is required; for former Quebec residents, CRA states a $13,777.50 threshold.

RRSPs and RRIFs are generally excluded from departure tax, but withdrawals by non-residents are generally subject to 25% Canadian withholding unless a treaty reduces the rate. A TFSA can generally be kept, but you cannot contribute while non-resident and your contribution room does not increase; the foreign country may also tax the TFSA.

CRA states that the penalty for failing to file Form T1161 by the due date is $25 for each day late, with a minimum of $100 and a maximum of $2,500.

Official Government & CRA References

2026 Departure Tax Metrics

  • Statutory Authority
    Income Tax Act subsection 128.1
  • T1161 Threshold
    More than $25,000 total FMV of relevant property
  • Capital-Gain Inclusion
    50% current enacted inclusion rate
  • Deferral Form
    Form T1244 under subsection 220(4.5)

Related Tax Tools

Canada Departure Tax & Deemed Disposition Guide→Canada-UAE Tax Moving Guide→Form NR73 Determination of Residency Guide→

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