Do Newcomers File the T1135? Not in Year One — Here Is the Exemption, the Clock, and What Counts After That

The T1135 is a disclosure, not a tax: Canadian residents whose specified foreign property has a total cost above C$100,000 at any time in the year must describe it annually — where it is, what it cost, what it earned. For newcomers the form comes with a grace year: an individual is exempt for the taxation year in which they first become resident in Canada. The logic is administrative mercy — arrival years are chaotic — and the clock it starts is real: from the second year, the American who kept a US brokerage account, US bank accounts, or a rented-out US house is almost certainly over the threshold and filing. The threshold is measured by cost, not value — and for a newcomer, cost means the deemed-acquisition value at arrival (the step-up sets the T1135 numbers too), converted to Canadian dollars. What counts is broad: funds and bank accounts outside Canada, shares of non-resident corporations (including every US stock and ETF, wherever the account holding them sits — US securities in a Canadian brokerage count), foreign real estate held for income, loans to non-residents, crypto held on foreign platforms by the prevailing analysis. The exclusions carry most of the good news for movers: US retirement plans (401(k)s, IRAs, Roths) are not specified foreign property; a personal-use Florida condo or the old family home kept empty for personal use is excluded; and property used exclusively in an active business stays out.

Key takeaways

• Year one: exempt. The exemption covers the year residency begins, however late in the year the property picture settles. It does not extend to a spouse who was already resident, and it does not cover corporations or trusts arriving — it is an individual's rule.
• Year two onward: file if over C$100,000 total cost. Cost for pre-arrival property is the arrival-date fair market value in CAD — one more reason the arrival valuation file matters. The test is at any time in the year, so mid-year dips below the line don't excuse the form.
• Two reporting tiers: total cost under C$250,000 all year allows the simplified method (check categories, top three countries, aggregate income); at or above C$250,000, the detailed method itemizes property by property. Most arriving professionals land in detailed territory immediately.
• In: US brokerage and bank accounts, US stocks and ETFs anywhere they are held, rented US real estate, HSAs and 529s (no exclusion protects them), foreign private company shares, loans to non-resident family.
• Out: 401(k)s and IRAs, personal-use real estate and personal effects, active-business property, and property inside Canadian registered accounts.
• Penalties: $25 a day late to a $2,500 maximum per year, escalating for gross negligence and failures after demand — and an unfiled T1135 can extend the CRA's reassessment window for the whole return. The form is cheap; its absence is not.

The year-two setup

The efficient sequence is to build the T1135 schedule once, in year one, while assembling the arrival valuations: list every non-Canadian asset, tag each in or out, record arrival cost in CAD, and note the income each produces. Year two's form then takes an hour, and every later year is an update. Families who skip this assemble it retroactively during a reassessment window question, at professional rates, from statements they no longer have.

Worked example

A physician becomes an Ontario resident on September 10, 2026, keeping: a US brokerage account (arrival value US$520,000), two US bank accounts (US$40,000), a rolled-over IRA (US$310,000), her former Michigan home (kept, empty, family use on visits), and an HSA (US$22,000). 2026: exempt — no T1135 regardless of the totals. 2027: the brokerage, bank accounts, and HSA are specified foreign property — roughly C$790,000 of arrival-value cost — well over both thresholds, so the detailed method itemizes them with their 2027 income; the IRA is excluded as a US retirement plan; the Michigan house stays off the form as personal-use property. In 2028 she rents the Michigan house out: it enters the T1135 from that year at its arrival-value cost, alongside its rental income (which was already going on the T1 and 1040 regardless). Her filing burden in steady state: one extra schedule per year, produced from a ledger she built in her exempt year — and a reassessment window that stays the normal length because the disclosure was always on time.

Official sources

The CRA sets out the penalties for failing to file Form T1135: $25 per day to a maximum of $2,500; where the failure is made knowingly or under circumstances amounting to gross negligence, $500 per month to a maximum of $12,000; and after a demand, $1,000 per month to a maximum of $24,000; plus an additional penalty where the form is more than 24 months late. — Canada Revenue Agency, Foreign Income Verification Statement – Penalties, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/penalties.html

The CRA states that you become a resident "when you establish significant residential ties in Canada," report world income from that date, and are "considered to have sold the property and to have immediately reacquired it at a cost equal to the fair market value (FMV) on the date that you became a resident of Canada." — Canada Revenue Agency, Newcomers to Canada, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/newcomers-canada-immigrants.html

Practitioner note

The T1135 is the form arriving Americans have never heard of and the CRA takes seriously, and the newcomer exemption is exactly one year of runway to get organized. We use the exempt year deliberately — the arrival valuation file doubles as the T1135 schedule — so the first real filing is an hour's work instead of a forensic project, and the reassessment clock on every return stays where it belongs.

See also: Browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the T1135 setup for new residents — the in-or-out classification of everything kept in the US, arrival-cost documentation, and the year-two filing built from the year-one file. See cross-border pricing or book a call.