Last updated: October 29, 2026

Canada's departure tax, often called an exit tax, is not a separate tax. When you stop being a resident of Canada, you are treated as having sold most of what you own at its fair market value on the day you leave, and as having bought it back at the same price. Any capital gain from this deemed sale goes on your return for the year you leave, and half of it is taxed at your normal rates.

This guide is for people who know they are leaving. It covers what is deemed sold and what is exempt, what happens to your home, the forms, how to defer the tax, and what happens when you later sell or move back. If you are still working out whether, or from what date, you become a non-resident, start with our guide on how to become a non-resident of Canada.

How departure tax works

The rule is in subsection 128.1(4) of the Income Tax Act. Immediately before you stop being a resident, you are deemed to dispose of each property you own, apart from the exceptions below, for its fair market value. You are then deemed to reacquire it at that same value. The Canada Revenue Agency (CRA) calls this a deemed disposition, and says the tax on any gain is also known as departure tax.

How much is taxed. Only the gain is taxed, not the value of the property. Half of a capital gain is a taxable capital gain under section 38 of the Income Tax Act, and that half is added to your income for the year you leave. In 2024 the government proposed raising the inclusion rate to two-thirds for gains above $250,000. It then deferred the change to January 1, 2026, and the CRA has since said the increase was cancelled. One-half applies to a departure in 2026.

Example. You leave Canada on June 30, 2026. You hold shares in a non-registered account that cost you $40,000 and are worth $100,000 that day.

  • You are deemed to sell the shares for $100,000. The capital gain is $60,000.
  • Half of it, $30,000, is added to your 2026 income and taxed at your marginal rate, although you received no cash.
  • From then on, your cost of the shares for Canadian tax is $100,000.
  • If the shares had fallen in value instead, the deemed sale would give you a capital loss.

What is deemed sold when you leave

Unless an exception applies, the deemed sale covers everything you own, inside and outside Canada. For most people leaving, that means:

  • shares, ETFs, mutual fund units and bonds held outside registered accounts
  • shares of a private corporation, including your own company
  • real estate outside Canada, including a home there (see the home section below)
  • a business you run outside Canada, and interests in partnerships
  • personal property such as art, jewellery and collections

What is exempt from departure tax

The CRA's page Dispositions of property for emigrants of Canada lists the exceptions. In plain terms:

  1. Canadian real estate. Real or immovable property in Canada, such as your home, a cottage or a rental property, is not deemed sold. Nor are Canadian resource property and timber resource property.
  2. Canadian business property. Capital property and inventory of a business you carry on through a permanent establishment in Canada.
  3. Registered plans and pensions. Pension plans, RRSPs, RRIFs, TFSAs, FHSAs, RESPs, RDSPs, pooled registered pension plans, deferred profit-sharing plans, annuities, employee security options subject to Canadian tax, interests in certain personal trusts resident in Canada, and interests in Canadian life insurance policies other than segregated fund policies. The full list is the definition of "excluded right or interest" in subsection 128.1(10) of the Act. What happens to these accounts after you leave, including the 1% tax on TFSA contributions made as a non-resident, is in our non-resident guide.
  4. Property you brought with you, if you were here 60 months or less. This is the 60-month rule below.

Exempt from the deemed sale does not mean exempt from Canadian tax. Canadian real estate and Canadian business property stay inside the Canadian tax system after you leave, and you are taxed when you actually sell them. Payments from pensions, RRSPs and RRIFs to a non-resident face non-resident withholding tax.

The 60-month rule

If you were a resident of Canada for 60 months or less in total during the 10 years before you leave, two kinds of property are not deemed sold:

  • property you owned when you last became a resident of Canada
  • property you inherited after you last became a resident

Anything you bought while living here is still deemed sold.

Example. You moved to Canada in September 2022 with an investment portfolio from your home country. You leave in August 2026, after 48 months. The portfolio you brought with you is not deemed sold. Shares you bought in Canada in 2024 are.

Choosing to include Canadian property (Form T2061A)

You can choose to have Canadian real estate or Canadian business property treated as sold when you leave, using Form T2061A, Election by an Emigrant to Report Deemed Dispositions of Property and any Resulting Capital Gain or Loss. This mainly helps when that property has fallen in value, because the loss can reduce the gains from your other deemed sales. It cannot bring your income below what it would have been without the departure rules (paragraph 128.1(4)(d)).

Departure tax and your principal residence

You may read that a principal residence never gives rise to departure tax. For a home in Canada the result is close, but the reason is different, and the exemption still matters later. What happens depends on where the home is and what you do with it.

A home in Canada

Your Canadian home is not deemed sold when you leave, because it is real property in Canada. The principal residence exemption plays no part at that point. It matters when you sell, and by then you are a non-resident.

The exemption is worked out with a formula. It counts the years you designate the home as your principal residence while you were resident in Canada, plus one extra year if you were a resident in the year you bought it. The CRA's page Principal residence and other real estate says the exemption "is limited to the number of tax years ending after the acquisition of the property during which the taxpayer was resident in Canada". Years after you leave generally don't count. The CRA's principal residence Folio (¶2.75) says this "typically prevents" a non-resident from using the exemption to eliminate the gain.

For example, say you keep the home without renting it out and sell it after you leave. You owned it for 19 tax years. You were a resident for 15 of them, including the year you bought it, and lived in it throughout those 15 years. The exemption covers 16/19 of the gain, and the other 3/19 is taxable in Canada when you sell.

If you rent it out after you leave

Turning your home into a rental property is a change in use. You are treated as having sold it at fair market value on that date and bought it back at the same price. The CRA says you don't pay tax on the part of that gain that relates to the years it was your principal residence. You report the deemed sale on Schedule 3 and Form T2091(IND), Designation of a Property as a Principal Residence by an Individual, and the home's cost then resets to its value on that date.

You can instead file an election under subsection 45(2) of the Act, by attaching a signed letter to your return for that year. There is then no deemed sale when you start renting, and you cannot claim capital cost allowance on the property while the election is in force. The election can let you designate the home for up to four more years, but only years in which you are a resident or deemed resident of Canada (Folio ¶2.50). For someone who has left, the main effect is to postpone the gain (Folio ¶2.76). Which route is better depends on the home's value and your plans, so work it through before you file.

Rent from the home is taxed under the non-resident rental rules: see our guide to non-resident rental income. When you sell, the buyer and the CRA's section 116 rules apply: see our section 116 certificate of compliance guide.

A home outside Canada

A home outside Canada is not on the exceptions list, so it is deemed sold when you leave. A property outside Canada can qualify as your principal residence (Folio ¶2.74). If it does, the exemption can reduce or remove the gain for the years you designate it while resident here. Your family can designate only one home for each year. Years used for your Canadian home cannot be used again for the foreign one.

The departure tax forms

Most people leaving with investments need the first two forms below. The third is optional, like Form T2061A above.

Form T1243: working out the gain

Form T1243, Deemed Disposition of Property by an Emigrant of Canada is where you calculate the gain or loss on each property deemed sold: its fair market value on your departure date minus its cost. The gains and losses go to Schedule 3 of your return. You need a value for every property on that date, so keep the statements or valuations you used. They also matter later, when you sell or if you move back.

Form T1161: the list of what you owned

Form T1161, List of Properties by an Emigrant of Canada is a disclosure, not a tax calculation. It is required if the property you have to list was worth more than $25,000 in total when you left. The list is wider than T1243. It includes property that is not deemed sold, such as your Canadian home, a Canadian rental property and Canadian business property.

You leave out:

  • cash, including bank deposits
  • registered plans and pensions, such as RRSPs, RRIFs and TFSAs
  • property covered by the 60-month rule, unless it is taxable Canadian property
  • personal-use items, such as household effects, clothing and cars, worth less than $10,000 each

Amounts are in Canadian dollars. The penalty for filing late is $25 a day, with a minimum of $100 and a maximum of $2,500.

Form T1244: deferring the tax

Form T1244 lets you postpone paying the tax on your deemed sales until you actually sell the property. The deferred tax bears no interest. Some rules to know:

  • Deadline. You make the election by April 30 of the year after you leave.
  • Security. If the federal tax you defer is more than $16,500 ($13,777.50 for former residents of Quebec), you must give the CRA adequate security for the excess. Up to that amount, the Act treats the tax as already secured (subsection 220(4.51)). You may also need security for provincial or territorial tax. The CRA asks you to contact it as soon as possible, before April 30, to arrange this.
  • Limits. You can defer any amount, but not the tax on an employee benefit plan.
  • It is a delay, not a reduction. The tax becomes payable when you sell the property.

Selling the property later

When you actually sell property that was deemed sold, the CRA asks you to send the Non-Resident T1 Adjustments section of the Winnipeg Tax Centre:

  • the description of the property, as listed on your Form T1243
  • the number of shares sold, if any
  • the date of the sale

If you deferred the tax, the deferred amount on that property is due by April 30 of the year after the sale.

Avoiding double tax. Your new country may tax the whole gain when you sell, including the part that built up while you lived in Canada. Canada then lets you deduct the foreign tax on that part from the tax on your departure-year return (subsection 126(2.21) of the Act). The tax must be paid to the country you live in, if Canada has a tax treaty with it. For real estate outside Canada, it can also be paid to the country where the property is. The deduction can't exceed the extra Canadian tax that the deemed sale caused. Claiming it means changing your departure-year return.

A loss after you leave. The value of a property can fall after you leave. If you then sell it at a loss while it is taxable Canadian property, you can elect on your return for the year of the sale to apply the loss against the gain from your departure (subsection 128.1(8)).

Canadian real estate and other taxable Canadian property. Selling these as a non-resident has its own reporting and withholding steps. See our section 116 guide.

Moving back to Canada after paying departure tax

If you left after October 1, 1996, and you still own property that was deemed sold, you can "unwind" the deemed sale when you become a resident again (subsection 128.1(6)). The CRA describes two versions:

  • Taxable Canadian property: you can reduce the gain reported on your departure-year return by an amount you choose, up to the gain you reported.
  • Other property, such as listed shares: you can reduce the proceeds you reported by the least of three amounts. These are the gain you reported, the property's fair market value on the date you return, and any amount you choose up to the lower of the first two.

Unwinding doesn't make the gain disappear. It comes off your departure-year return, and your cost for the property is reduced to match, so the gain is taxed when you eventually sell. In the earlier example, suppose you come back still holding the shares and they are worth at least $60,000. You can reduce the $60,000 gain reported for 2026 to nil, and the shares come back with a lower cost.

The election is a letter to the CRA, sent by your filing due date for the year you come back, listing each property and its fair market value. Any security you gave for deferred tax may be returned in whole or in part. If you deferred the tax, the CRA also warns that you may have to pay it when you come back, so contact the CRA before you return. The CRA's dispositions page has the details. What else changes when you return, such as Form NR74, is in our non-resident guide.

Key dates

  • The day you leave: the values for your deemed sales are fixed.
  • April 30 of the following year: the deadline for the T1244 election, so arrange any security with the CRA before then. It is also when the balance of your departure-year tax is due.
  • Your filing due date (April 30 for most people): your departure-year return, with Forms T1243 and T1161. Send T1161 by this date even if you don't file a return.
  • When you sell: report the sale to Winnipeg. Any deferred tax on that property is due by April 30 of the following year.
  • If you come back: the unwind request goes in by your filing due date for the year you return.

Frequently asked questions

I own shares of a Canadian private company. Can the lifetime capital gains exemption reduce the tax?

It may. If they are qualified small business corporation shares, the capital gains deduction can apply to the gain from the deemed sale. For this deduction, the CRA treats you as a resident throughout the year you leave if you were a resident throughout the year before. For 2026, the CRA's indexed amounts for 2026 put the lifetime capital gains exemption at $1,275,000 of gains. That limit comes from proposed changes the CRA already applies. Whether your shares qualify depends on detailed tests in the Act, so check this well before you leave. See the CRA's page on the capital gains deduction.

Are my employee stock options deemed sold?

Unexercised options that are subject to Canadian tax are on the exempt list above, but they still go on Form T1161: the CRA's list of what to leave off that form does not include them. Shares you have already bought by exercising options are ordinary shares, and they are deemed sold like any others.

Do I pay instalment interest on departure tax?

No. When the CRA works out instalment interest for the year you leave, the Act removes the deemed sales from the calculation (subsection 128.1(5)). So the departure tax does not make your earlier instalments short. You still pay it with the rest of your balance owing for that year, unless you have elected to defer it.

Does giving up my Canadian citizenship trigger departure tax?

No. The CRA says your income tax obligations are based on your residency status, not your citizenship or immigration status. Departure tax is triggered when you stop being a resident. You can keep your citizenship and still owe it, and giving up citizenship while you still live here triggers nothing. For how residency is decided, see our non-resident guide.

My home is still available to me in Canada, but a tax treaty makes me a resident of my new country. Does departure tax apply?

Yes. If a treaty's tie-breaker rules make you a resident of the other country, you are a deemed non-resident of Canada from that point. The CRA's Leaving Canada (emigrants) page says deemed non-residents "are subject to the same rules as emigrants". The deemed sale, Form T1161 and the T1244 deferral all apply, even though you kept a home here.

Planning to leave Canada?

GTA Accounting's non-resident tax services include completing Form T1161 and filing departure tax returns. If you are planning a move, contact us before you leave, while there is still time to plan.