Can I defer paying Canadian departure tax?

Yes. When you stop being a Canadian resident, ITA 128.1(4) deems you to have disposed of your property at fair market value, subject to five carve-outs, and the tax on that paper gain is payable even though you sold nothing. Form T1244 defers paying it, and CRA says you pay later, without interest, when you sell or otherwise dispose of the property. It is a security arrangement rather than a payment plan.

What does Form T1244 actually do?

It elects, and nothing more. ITA 220(4.5) requires the election to be made in prescribed manner, and its own opening words leave out a right to a benefit under, or an interest in a trust governed by, an employee benefit plan. CRA publishes a form whose title names the subsection: “T1244 Election, under Subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property”. CRA ties it to the deemed disposition you report on Form T1243, so the two work as a pair.

“Complete this form if you ceased to be a resident of Canada for income tax purposes in the year and you are electing to defer the payment of tax on income relating to the deemed disposition of a property indicated on Form T1243, Deemed disposition of Property by an Emigrant of Canada.” CRA, Form T1244

“You can elect to defer the payment of tax on income relating to the deemed disposition of property (departure tax), regardless of the amount. You would then pay the tax later, without interest, when you sell (or otherwise dispose of) the property. This election does not apply to the deemed disposition of an employee benefit plan.” CRA, Dispositions of property for emigrants of Canada, “Deferring the tax owing”

The statute runs the same way by a longer route. Element B of the ITA 220(4.5)(a) formula only shelters property “that has not been subsequently disposed of before the beginning of the particular year”, so the deferred amount is recomputed each year as you dispose of it, and CRA’s plainer sentence is the same idea stated as an outcome.

Note what the descriptions don’t say. They say nothing about needing a reason, demonstrating hardship, or persuading anyone to make the election itself. Hardship only becomes relevant later, and only where the Minister determines you can neither pay the tax nor provide adequate security without undue hardship. The marginal note on the governing subsection is “Security for departure tax”, which is the clearest signal of what is really going on.

Do I have to post security to defer the tax?

Not necessarily. Once you elect, ITA 220(4.51) deems the Minister to have accepted adequate security up to a floor, and CRA sizes that floor at $16,500 of federal tax, or $13,777.50 for a former Quebec resident. Below it there is no federal security to arrange, though CRA says provincial or territorial security may also be required. Above it you furnish security for the excess, though under ITA 220(4.7) the Minister may accept less where the Minister determines you can neither pay the tax nor provide adequate security without undue hardship.

“If an individual (other than a trust) elects under subsection (4.5) that that subsection apply in respect of a taxation year … the Minister is deemed to have accepted at any time after the election is made adequate security for a total amount of taxes payable under Parts I and I.1 by the individual for the emigration year equal to the lesser of (a) the total amount of those taxes that would be payable for the year by a trust resident in Canada (other than a graduated rate estate or a qualified disability trust as defined in subsection 122(3)) the taxable income of which for the year is $50,000, and (b) the greatest amount for which the Minister is required to accept security furnished by or on behalf of the individual under subsection (4.5) at that time in respect of the emigration year” ITA 220(4.51)

The statute states the floor as a computation rather than a dollar figure. The $50,000 is the taxable income fed into a notional trust calculation, so the statutory threshold is whatever tax that calculation produces, and CRA is the source that puts a number on it.

“If you make this election and the amount of federal tax owing on income from the deemed disposition of property is more than $16,500 (more than $13,777.50 for former residents of Quebec), you have to provide adequate security to cover the amount. You may also be required to provide security to cover any applicable provincial or territorial tax payable.” CRA, Dispositions of property for emigrants of Canada, security threshold

Read that as a federal figure with a provincial tail, because that is how CRA writes it. The $16,500 answers only the federal side, the Quebec figure is separate and lower, and CRA’s own next sentence says provincial or territorial security may be required on top. So “under the floor” is not the same as “nothing to post”.

That amount is a floor rather than a cap on the deferral. The deferral itself can be larger; what the deemed-security rule does is remove the practical burden of arranging security for the first slice of it. And because the rule takes the lesser of two amounts, where your whole deferrable amount comes in below the trust figure it is limb (b) that binds, the deemed security covers all of it, and the election is close to frictionless. Pushing the other way, ITA 220(4.52) limits what can be deemed accepted to roughly the difference between your tax for the year and what that tax would have been if the Act were read without the deemed-disposition rule.

Above the floor, furnishing security is real work, and even then the requirement is not absolute. ITA 220(4.7) is conjunctive: the Minister has to determine that you can neither pay the tax nor provide adequate security without undue hardship, and only then may the Minister accept security different from or of lesser value than what would otherwise be required. Both limbs have to fail before the valve opens. ITA 220(4.71) shuts the obvious door: in making that determination the Minister ignores any disposition, lease, encumbrance or mortgage you entered into for the purpose of influencing it.

“If, in respect of any period of time, the Minister determines that an individual who has made an election under either subsection (4.5) or (4.6) (a) cannot, without undue hardship, pay or reasonably arrange to have paid on the individual’s behalf, an amount of taxes to which security under that subsection would relate, and (b) cannot, without undue hardship, provide or reasonably arrange to have provided on the individual’s behalf, adequate security under that subsection, the Minister may, in respect of the election, accept for the period security different from, or of lesser value than, that which the Minister would otherwise accept under that subsection.” ITA 220(4.7)

And if security you did furnish is later found inadequate, ITA 220(4.53) requires the Minister to notify you in writing and to accept adequate security furnished within 90 days of that notification. Whether the Minister would make an undue-hardship determination on your own facts is not something this page can tell you.

Does interest keep running on the deferred tax?

Not on the amount for which security is accepted, and CRA says you pay later without interest. ITA 220(4.5)(b) directs that interest and penalty be computed as though the secured amount had actually been paid. The arrears charge that would otherwise bite is ITA 161(1), marginal note “General”, which charges prescribed-rate interest on tax outstanding after your balance-due day, and 161(1) is not one of the three subsections the carve-out names. The carve-out covers the instalment provisions, and ITA 128.1(5) keeps the deemed disposition out of the instalment base.

“except for the purposes of subsections 161(2), (4) and (4.01), (i) interest under this Act for any period that ends on the individual’s balance-due day for the particular year and throughout which security is accepted by the Minister, and (ii) any penalty … shall be computed as if the particular amount for which adequate security has been accepted under this subsection were an amount paid by the individual on account of the particular amount.” ITA 220(4.5)(b)

Read the opening words carefully. The deeming is switched off for the purposes of three named subsections, and this page makes no claim about how they operate internally. Their marginal notes in the Act are “Interest on instalments” for 161(2), “Limitation, farmers and fishermen” for 161(4) and “Limitation, other individuals” for 161(4.01), so the carve-out sits on the instalment side of section 161 rather than on the arrears charge in 161(1). What the deeming does reach is that arrears charge, so a properly secured deferral does not accumulate it against you.

The obvious next worry is whether the departure tax then drives up your instalments, and the Act answers it in the same section the deemed disposition comes from. ITA 128.1(5), marginal note “Instalment interest”, says that where an individual is deemed by 128.1(4) to have disposed of property, in applying sections 155 and 156, subsections 156.1(1) to (3) and subsections 161(2), (4) and (4.01), total tax payable for the year is deemed to be the lesser of the real figure and the figure you would get if 128.1(4) did not apply. The instalment base is measured without the deemed disposition, which is the reader-favourable direction.

“If an individual is deemed by subsection (4) to have disposed of a property in a taxation year, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the individual’s total tax payable under this Part for the year is deemed to be the lesser of (a) the individual’s total tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and (b) the amount that would be determined under paragraph (a) if subsection (4) did not apply to the individual for the year.” ITA 128.1(5)

“Where at any time after a taxpayer’s balance-due day for a taxation year (a) the total of the taxpayer’s taxes payable under this Part and Parts I.3, VI, VI.1 and VI.2 … exceeds (b) the total of all amounts each of which is an amount paid at or before that time on account of the taxpayer’s tax payable … the taxpayer shall pay to the Receiver General interest at the prescribed rate on the excess, computed for the period during which that excess is outstanding.” ITA 161(1)

Is my Canadian house part of the deemed disposition?

No. ITA 128.1(4)(b) deems disposition of each property you own other than five categories, and the first is real or immovable property situated in Canada, a Canadian resource property or a timber resource property. So the family home isn’t swept in, and there is no departure tax on it to defer. The third category is an excluded right or interest, which ITA 128.1(10) defines to reach RRSPs, RRIFs, RESPs, RDSPs, TFSAs, FHSAs, pensions and other registered plans, and it is usually the larger exclusion. How the house is taxed on a later sale is a separate question.

“the taxpayer is deemed to have disposed … of each property owned by the taxpayer other than, if the taxpayer is an individual, (i) real or immovable property situated in Canada, a Canadian resource property or a timber resource property” ITA 128.1(4)(b)(i)

That paragraph carries five exclusions rather than one, and the one most people miss is subparagraph (iii), “an excluded right or interest of the taxpayer”. Subsection 128.1(10) defines the term, and it reaches RRSPs, RRIFs, RESPs, RDSPs, TFSAs, FHSAs, deferred profit sharing plans, employees profit sharing plans, superannuation and pension plans, retirement compensation arrangements, foreign retirement arrangements, rights under a subsection 7(1) stock option agreement, retiring allowances and rights to annuity payments. If most of what you hold sits in registered plans, most of it is outside the deemed disposition before you count anything.

“excluded right or interest of a taxpayer who is an individual means (a) a right of the individual under, or an interest of the individual in a trust governed by, (i) a registered retirement savings plan … (ii) a registered retirement income fund, (iii) a registered education savings plan, (iii.1) a registered disability savings plan, (iii.2) a TFSA, (iii.3) a FHSA, (iv) a deferred profit sharing plan … (v) an employees profit sharing plan … (viii) a superannuation or pension fund or plan (other than an employee benefit plan), (ix) a retirement compensation arrangement, (x) a foreign retirement arrangement, or (xi) a registered supplementary unemployment benefit plan; … (c) a right of the individual under an agreement referred to in subsection 7(1); (d) a right of the individual to a retiring allowance; … (f) a right of the individual to receive a payment under (i) an annuity contract, or (ii) an income-averaging annuity contract …” ITA 128.1(10)

Subparagraph (iv) is the short-stay one. Where you were not resident in Canada for more than 60 months during the 120-month period ending at departure, property you already owned when you last became resident, or acquired by inheritance or bequest afterwards, is also outside the deemed disposition. That is a statement about categories of property rather than about your total, so someone who arrived recently and then built a portfolio in Canada is fully caught on the portfolio.

“(iii) an excluded right or interest of the taxpayer, (iv) if the taxpayer is not a trust and was not, during the 120-month period that ends at the particular time, resident in Canada for more than 60 months, property that was owned by the taxpayer at the time the taxpayer last became resident in Canada or that was acquired by the taxpayer by inheritance or bequest after the taxpayer last became resident in Canada” ITA 128.1(4)(b)(iii) and (iv)

When is the election due?

April 30 of the year after you leave. The electing words of ITA 220(4.5) put it at your balance-due day for the emigration year, and ITA 248(1)(c) puts that at April 30 in the following taxation year for a living individual. CRA says the same in plain words. The trap is that ITA 150(1)(d) gives an individual who carried on a business until June 15 to file, so the election can lapse about six weeks before the return it would have travelled with is even due. Miss April 30 and ITA 220(4.54) says the Minister may extend it if, in the Minister’s opinion, that would be just and equitable.

“You must make this election by April 30 of the year after you emigrate from Canada.” CRA, Dispositions of property for emigrants of Canada, election deadline

“in any other case where the taxpayer is an individual, April 30 in the following taxation year” ITA 248(1), definition of “balance-due day”, paragraph (c)

Paragraph (c) is the general case. Paragraph (b) moves the day for an individual who died after October in the year and before May in the following taxation year, and paragraph (a) deals with a trust, so read the definition rather than treating April 30 as universal. What the definition does not do is bend for a business. ITA 150(1)(d)(ii)(A) gives “the following June 15” to “an individual who carried on a business in the year”, and that is the filing date for the return rather than the balance-due day the election keys to.

That extension power is ITA 220(4.54), and it says the Minister may extend the time for making the election if, in the Minister’s opinion, that would be just and equitable. Read it as discretion and not as a right: plan to April 30, and treat an extension as something you would have to ask for and could be refused.

“If in the opinion of the Minister it would be just and equitable to do so, the Minister may at any time extend (a) the time for making an election under subsection (4.5); (b) the time for furnishing and accepting security under subsection (4.5); or (c) the 90-day period for the acceptance of security under paragraph (4.53)(b).” ITA 220(4.54)

Nothing in that subsection says when the Minister would use the power, and this page makes no claim that an extension would be granted on your facts. What it does mean is that a reader who is already past April 30 should ask rather than assume the election has gone.

The point	Where it comes from
T1243 reports the deemed disposition, T1244 defers the tax	CRA, Form T1244
The subsection’s own opening words leave out a right to a benefit under, or an interest in a trust governed by, an employee benefit plan, and CRA says the election “does not apply” to one	ITA 220(4.5) opening words, and CRA, Dispositions of property for emigrants of Canada
The deferred tax is paid later, without interest, when you sell or otherwise dispose of the property	CRA, Dispositions of property for emigrants of Canada
Once you elect, the Minister shall accept adequate security you furnish on or before your balance-due day for the emigration year, which for a living individual is April 30 in the following taxation year	ITA 220(4.5)(a) with ITA 248(1)(c)
Security is deemed accepted up to a floor amount, being the lesser of the notional trust tax and your own deferrable amount	ITA 220(4.51)
CRA sizes that floor at $16,500 of federal tax, or $13,777.50 for a former Quebec resident, and says provincial or territorial security may also be required	CRA, Dispositions of property for emigrants of Canada
Interest is computed as if the secured amount were paid, except for the purposes of subsections 161(2), (4) and (4.01)	ITA 220(4.5)(b)
For the instalment provisions, including 161(2), (4) and (4.01), total tax payable is deemed to be the lesser of the real figure and the figure without the deemed disposition	ITA 128.1(5)
Canadian real property is outside the deemed disposition, and so are registered plans and pensions as excluded rights or interests	ITA 128.1(4)(b)(i) and (iii), with 128.1(10)
Above the floor you furnish security for the excess, though the Minister may accept less where the Minister determines you can neither pay the tax nor provide adequate security without undue hardship	ITA 220(4.7)
Election due by the balance-due day for the emigration year, which for a living individual is April 30 in the following taxation year, a time the Minister may extend if in the Minister’s opinion that would be just and equitable	ITA 220(4.5), ITA 248(1)(c) and ITA 220(4.54)
That April 30 does not move to June 15 when the return of a business-carrying individual does	ITA 248(1)(c) with ITA 150(1)(d)(ii)(A)

• Canadian departure tax and Forms T1161 and T1243, which owns the reporting side
• The US basis step-up treaty election, for the other half of the same move
• What if the property drops in value after departure, because the deferral keeps running until the actual sale, and 128.1(8) can reduce the departure gain if the property was still taxable Canadian property at that point
• Whether you are still a Canadian tax resident, because none of this starts until you have actually ceased residence

Being clear about what this page does not claim. The $16,500 and $13,777.50 figures are CRA’s, they are federal tax on the deemed disposition rather than a deferral cap, and this page doesn’t work out what your own deferred amount comes to or what provincial or territorial security would be required on top. It doesn’t say what counts as adequate security in a given case, and it doesn’t say how subsections 161(2), (4) and (4.01) operate internally, only how ITA 128.1(5) treats the instalment base. It doesn’t say the Minister would extend your deadline under ITA 220(4.54) or accept lesser security under ITA 220(4.7); both powers exist, both are discretionary, and this page takes no view on either outcome. It also doesn’t say the election is always worth making.

What should I do next?

Work out what is actually caught first. Canadian real property is out, registered plans and pensions are out as excluded rights or interests, and a short stay may pull more out. Then compare the federal tax on what remains against CRA’s $16,500, or $13,777.50 if you left Quebec, which mostly decides whether you file a form or negotiate a security arrangement. Check provincial or territorial tax separately. File by April 30 of the year after you left, even if a business pushes your return to June 15. If you have already passed it, ITA 220(4.54) is the provision to ask about.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.