Departure Tax in Canada: Deemed to Sell What You Keep
A portfolio you still own, taxed as though you sold it
The departure tax in Canada is not a separate tax. It is a deemed sale. On the day you stop being a resident, the Income Tax Act treats most of what you own as sold at fair market value and taxes the gain, even though nothing changed hands and no cash arrived to pay the bill.
On the numbers below, someone leaving with a non-registered portfolio worth $350,000 against an adjusted cost base of $200,000 has a deemed capital gain of $150,000 and $16,362.52 of federal tax caused by the departure. That is the figure people brace for. What rarely gets said is that the Act lets you defer the whole amount by election, with no interest running, and deems the first $16,500 of security already furnished on your behalf. You post nothing for it. At $60,000 of other income that covers a deemed gain of up to $151,057, which is most people’s entire bill.
What the deemed disposition actually is
Under section 128.1(4)(b) of the Income Tax Act, a taxpayer who ceases to be resident “is deemed to have disposed … of each property owned by the taxpayer … for proceeds equal to its fair market value at the time of disposition”. The deemed moment is immediately before residence ends, so the gain falls in your final Canadian tax year. The CRA’s guidance for emigrants agrees: “you are considered to have sold certain types of property (even if you have not sold them) at their fair market value (FMV)”.
That date is not the one on your boarding pass. The CRA sets it as the latest of three: the date you leave Canada, the date your spouse or common-law partner and dependants leave Canada, and the date you become a resident of the country you settle in. The last of them governs.
Only half of a capital gain is taxable under section 38(a), which is why the effective rate on the full gain lands well below the headline bracket. The deemed proceeds also become the new cost base going forward, so if a cost base that moves is unfamiliar ground, our guide to adjusted cost base explains how ACB is tracked and why it sets the size of every gain you report.
What is not caught
Three exclusions do most of the work here.
Registered accounts are named in the statute. Section 128.1(4)(b)(iii) excludes “an excluded right or interest of the taxpayer”, and section 128.1(10) defines that term by listing a registered retirement savings plan, a registered retirement income fund, a registered education savings plan, a registered disability savings plan, a TFSA, a FHSA, a deferred profit sharing plan, an employees profit sharing plan, an employee benefit plan, a superannuation or pension fund or plan, and a foreign retirement arrangement. Rights to benefits under the Canada Pension Plan and the Old Age Security Act are excluded too. None of it is deemed sold.
Canadian real property is not deemed sold either. Section 128.1(4)(b)(i) excludes “real or immovable property situated in Canada, a Canadian resource property or a timber resource property”. A house you keep is taxed when you actually sell it, not on the way out.
If you were here briefly, what you brought leaves untaxed. Section 128.1(4)(b)(iv) exempts property owned when you last became resident, and property inherited since, where the taxpayer “was not, during the 120-month period that ends at the particular time, resident in Canada for more than 60 months”. Five years or less of residence in the last ten, and the deemed disposition largely does not reach what you arrived with.
The worked example
Someone leaving with $60,000 of employment income earned to the departure date, a non-registered portfolio, an RRSP and a TFSA.
| Item | Figure |
|---|---|
| Non-registered ACB | $200,000 |
| Non-registered FMV at departure | $350,000 |
| Deemed capital gain | $150,000 |
| Taxable capital gain at one-half | $75,000 |
| Federal tax on $60,000 alone (B) | $8,496.01 |
| Federal tax on $135,000 (A) | $24,858.53 |
| Federal tax caused by leaving (A minus B) | $16,362.52 |
| Effective rate on the $150,000 gain | 10.91% |
The taxable half stacks on the employment income, running through the 20.5% federal band and into the 26% band on 2026 rates. Because only half the gain counts, the full $150,000 is taxed at an effective 10.91% federally. The RRSP at $180,000 and the TFSA at $95,000 never enter the calculation.
The election, and the security you never post
Section 220(4.5) lets an individual elect, in prescribed manner and on or before the balance-due day for the emigration year, to defer the tax attributable to the deemed disposition. The Act defines that amount as A minus B: A is the tax payable for the year, B is the tax that would have been payable had the deemed disposition not happened. Above, that is the $16,362.52. While the election holds, section 220(4.5)(b) computes interest as if the secured amount “were an amount paid by the individual”, so nothing accrues on the deferral.
The Minister “shall … accept adequate security”, and section 220(4.51) deems a first slice already given: the lesser of the tax “that would be payable for the year by a trust resident in Canada … the taxable income of which for the year is $50,000” and the full amount securable. “That security is deemed to have been furnished by the individual.” A trust pays the highest individual percentage under section 122(1)(a), and section 117(2)(e) puts that rate at 33%. So the automatic slice is 33% of $50,000, or $16,500.
Set that against the bill, at $60,000 of other income.
| Portfolio FMV | Deemed gain | Federal tax (A-B) | Security to post |
|---|---|---|---|
| $250,000 | $50,000 | $5,125 | $0 |
| $350,000 | $150,000 | $16,363 | $0 |
| $400,000 | $200,000 | $22,863 | $6,363 |
| $500,000 | $300,000 | $36,719 | $20,219 |
| $650,000 | $450,000 | $59,530 | $43,030 |
| $1,000,000 | $800,000 | $117,280 | $100,780 |
The break-even deemed gain is $151,057. Below it, the entire federal departure tax defers with nothing posted and no interest running. The $150,000 case is not a payment problem, it is a filing exercise. Above the break-even, only the excess needs real security.
Reporting: Forms T1243 and T1161
Two forms do the reporting, and they answer different questions. The deemed disposition itself goes on Form T1243, “Deemed Disposition of Property by an Emigrant of Canada”, which the CRA describes as the form for someone who “ceased to be a resident of Canada for income tax purposes in the year and you were deemed to have disposed of certain types of properties when you left Canada”. The second form is a list, and its threshold is low and separate from the tax. The CRA states that if the total FMV of all the property you owned when you left Canada was more than $25,000, you complete Form T1161, List of Properties by an Emigrant of Canada. It is an information return, so section 162(7) sets the late penalty at “$25 … multiplied by the number of days, not exceeding 100”, with a floor of $100 and a maximum of $2,500.
T1161 is routinely confused with T1135, a different form for a different situation: foreign property held while you are still resident here. Our explainer on the T1135 foreign property threshold sets out when that one applies.
After you have gone
Keeping a registered account open as a non-resident is one thing. Feeding it is another.
Section 207.03 charges a non-resident who contributes to a TFSA “a tax … equal to 1% of the amount of the contribution in respect of each month”, running until the amount is withdrawn and designated, or until they become resident again. A $7,000 contribution made while non-resident costs $70 after one month, $420 after six and $840 after twelve. The residency rules sit in full in our TFSA guide, worth reading before any contribution if your status is in flux.
Withdrawals run the other way. Section 212(1) provides that “every non-resident person shall pay an income tax of 25%” on amounts paid or credited by a Canadian resident, so a $20,000 RRSP withdrawal taken after you leave has $5,000 withheld.
What these numbers do not include
Every tax figure here is federal only. Provincial tax applies on top, based on the province you resided in when you left, and we did not compute it. A and B are both figured before non-refundable personal credits, most of which cancel in the subtraction, and an emigrant prorates them by days resident under section 118.91. The $151,057 break-even belongs to $60,000 of other income and moves with it. Departure tax also turns on residency facts particular to each person, and residency is a question of fact rather than a box you tick, so the figures here are illustrative federal calculations and not a computation of anyone’s liability. This is worth taking to a qualified cross-border tax professional before you go, not after.
Data as of September 21, 2026. Statutory references are to the Income Tax Act as current to 2026-07-21 and last amended on 2026-06-18.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Income Tax Act sections 128.1, 220, 122, 117, 162, 207.03 and 212, from Justice Laws Canada, retrieved September 21, 2026; the Act as retrieved is current to July 21, 2026 and last amended June 18, 2026. Canada Revenue Agency, ‘Leaving Canada (emigrants)’ and Form T1243, ‘Deemed Disposition of Property by an Emigrant of Canada’, both retrieved September 21, 2026. Federal 2026 tax brackets from the Canada Revenue Agency, ‘Current year tax rates and income brackets (2026)’. All tax arithmetic is ours, calculated from those sources. Figures are federal only and are calculated before non-refundable personal credits.
