Canadian Departure Tax Explained: The Deemed Sale
The deemed sale on emigration, what's excluded, deferring with security, and the U.S. basis election
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Canada's departure tax is tax on a deemed sale: when someone stops being a Canadian resident, most of their property is treated as sold at fair market value on the departure date, and the gains are taxed on the final return. Canadian real estate, RRSPs, RRIFs, and pensions are excluded; deferral with security is possible.
On this page
What's deemed sold — and what isn't
| Deemed disposed of | Excluded |
|---|---|
| Non-registered investments (stocks, funds, bonds) | Canadian real estate (taxed when sold, under the non-resident rules) |
| Shares of private corporations | RRSPs, RRIFs, registered pension plans, TFSAs (not deemed sold — though a TFSA isn't tax-sheltered for U.S. purposes) |
| Foreign real estate (a Florida condo) | Canadian business property used in a Canadian permanent establishment |
| Cryptocurrency and other capital property | Employee stock options subject to Canadian tax (taxed later as employment income) |
Deferral and reporting
The emigrant may elect to defer the tax on Form T1244 — by April 30 of the year after emigrating, paying it without interest when the property is actually sold — security is required only if the deferred federal tax exceeds C$16,500 (C$13,777.50 for former Quebec residents); Form T1243 lists the deemed dispositions; Form T1161 lists all property if its total fair market value exceeds C$25,000 (excluding cash, registered plans, and personal-use items worth under C$10,000), and filing it late costs C$25 a day (minimum C$100, maximum C$2,500) even if no tax is due.
Avoiding double tax with the United States
The United States doesn't step up the basis of property on arrival. Under the treaty's Article XIII(7), the new U.S. resident can elect on the first U.S. return to treat the property as sold and repurchased at its fair market value on the departure date — so the gain Canada taxed isn't taxed again by the United States (the ACB guide; disclosed on Form 8833).
Frequently asked questions
What is Canada's departure tax?
Tax on capital gains from a deemed sale of most property at fair market value on the day you stop being a Canadian resident.
Is my house subject to departure tax?
No — Canadian real estate is excluded; it's taxed when actually sold.
Can I defer the departure tax?
Yes, by election, with security for larger amounts, until the property is sold.
Will the U.S. tax the same gain again?
Not if you make the treaty's Article XIII(7) basis election on your first U.S. return.
Official sources
The Canada Revenue Agency explains: “If you ceased to be a resident of Canada in the year, you were deemed to have disposed of certain types of property at their fair market value (FMV) when you left Canada and to have immediately reacquired them for the same amount. This is called a deemed disposition.” — Canada Revenue Agency, Dispositions of property for emigrants of Canada, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/dispositions-property.html
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk and Canadian Tax Desk handle departure returns — deemed disposition computations, T1161, T1243, and T1244 filings, security arrangements, and the U.S. basis election. See pricing or book a call.
Cross-border taxes, handled in one place
U.S. and Canadian filings prepared together by our U.S. and Canadian Tax Desks.
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