Canada Departure Tax 2026: Why Leaving is Expensive

In case you’re emigrating from Canada in 2026, the Canada departure tax (also known as an exit tax or deemed disposition) is the most important figure to know before you leave. It doesn’t represent any extra charge applied at the border crossing point. Instead, the tax results from section 128.1(4)(b) of the Income Tax Act and represents the deemed disposition of most of your capital property at the moment when you cease to be a Canadian tax resident, even if nothing is changing hands in reality. In case you’re relocating from Canada with a non-registered portfolio, private corporation shares, or you’re planning to have a career across borders, the departure tax shouldn’t be a mere detail to consider but a separate filing to plan.

What Triggers the Canada Departure Tax?

Residence for tax purposes, not the Canadian citizenship or immigration status, matters here. As soon as the CRA deems you to be a non-resident of Canada, based on the facts of your domicile, spouse, and economic ties, and not on a certain date marked on your calendar, the deemed disposition of capital properties begins automatically. No election is available here. Irrelevant to the reason why you leave Canada – employment, retirement or international business development – ceasing the Canadian tax residency initiates the process of departure taxation in 2026. The only difference each year is the tax rate environment – for 2026, the applicable capital gains inclusion rate is 50% instead of proposed 66.67% announced for March 2025 – which represents a bit better scenario for the taxpayers than a year ago.

What Is Included? What Is Not?

Everything you own isn’t included in the deemed disposition, and misunderstanding what goes where is one of the most frequent mistakes we observe. Property typically included: stocks, bonds, ETFs in the non-registered investment account, shares of the private corporation (Canadian and foreign), partnership interests, mutual fund units, and appreciated personal-use property with FMV above some thresholds. Property typically not included: Canadian real estate (it will be taxed when it is sold, not earlier), registered accounts such as RRSPs, RRIFs, TFSA, and RPP, and Canadian resource or timber property. This exemption of the real estate surprises many taxpayers because it means that you’ll be taxed by departure year mostly by your investments and your corporation, not by your house.

Owner-managers should also pay attention to private corporation shares and departure tax. A CCPC with accumulated retained earnings and/or appreciated assets may generate a considerable deemed gain on the departure from Canada, and the process of assessment of its value requires much effort, including the independent appraisal, taking a few weeks rather than days. Thus, the initiation of the appraisal only a few weeks before the departure becomes the costly mistake for those who plan to relocate.

T1161, T1243 Forms and Important Deadlines

The filing of Canada departure tax involves two CRA forms. The first one is T1161 form which represents the list of all of your properties with the FMV above $25,000 at the time of your departure, and missing it brings you to the penalty of $100 per day until $2,500 and in addition to the amount of tax you’re going to owe. Form T1243 does the computations of the capital gain/losses resulting from your deemed disposition and enters it into your annual T1 tax filing in Canada. These two forms must be submitted with your last T1 tax return filed, which makes the timeline more urgent than expected – calculations must be completed before the departure.

Most taxpayers additionally use T1 form NR73 – “Determination of Residency Status” – to get the opinion of the CRA when you ceased to be a tax resident of Canada. Though this filing is optional and the opinion of the CRA is not binding for you, it’s worth discussing with your advisor in case your departure is considered to be controversial.

How To Defer Payment of the Departure Tax?

And here comes the main point that changes the calculation completely: you’re not obliged to pay your departure tax in the year of your departure! Under section 220(4.5) of the Income Tax Act, you can elect, using form T1244, to defer its payment interest-free until you actually dispose of the related properties. For small portfolios, this is not a problem, but the guarantee of the deferred payment is necessary when the federal tax owing on the deemed disposition exceeds roughly $16,500 (which corresponds to about $100,000 of capital gains). This guarantee can take various forms, such as letter of credit or lien. Moreover, this deferral can be made on a property-by-property basis, so you can defer the payment of the tax on some properties but settle others immediately.

Why 2026 Is the Best Time to Plan Your Exit From Canada

There are two other features of 2026 which will make pre-departure tax planning more useful than for many previous years. First of all, the Lifetime Capital Gains Exemption, now indexed to roughly $1.275 million for qualifying small business corporation shares, is capable of covering a considerable part of the deemed disposition if the corporate structure satisfies the requirements, and it requires some time for structuring, which you don’t have after your departure. Secondly, as the increase of the capital gains inclusion rate is finally cancelled forever, the calculations related to triggering your gains before or after departure became more beneficial to taxpayers. Thus, none of these actions will make your departure tax unnecessary, but they will help you to decrease the tax bill.

Dual Residency, Canada-US Tax Treaty and Tie-Breaker Rules

Not always departure is the switch to the new residency status at once and on a specific date. Many clients who divide their time between Canada and another country (the Canada-US tax case is the most widespread one we meet) become resident in both countries under the national tax legislation. Canadian tax treaties usually provide tie-breaker rules (permanent home, center of vital interests, habitual abode) that determine which country wins for the treaty purposes. Analyzing these criteria beforehand will keep the computation of the departure tax clean, and will allow you to estimate whether the gain will be taxed in the other country as well.

Plan the Exit Before You Relocate!

The Canada departure tax is not something to handle after relocation – in fact, the great majority of work on it must be completed when you’re still a resident of Canada, not after. Inventory of the properties, the deferral of the tax, structuring towards LCGE and the analysis of the tie-breaker rules for those who divide their residency between two countries require your planning before you depart. In case you consider relocation from Canada in the next one-two years, it’s worth discussing your departure tax exposure.