Do I Owe Canadian Departure Tax When I Move to the US? (T1161, T1243, and the Deemed Disposition)

If you’re leaving Canada with investments outside your registered accounts, probably yes. On the day you become a non-resident, the CRA deems you to have sold most of your property at fair market value and taxes the paper gain on your final Canadian return under section 128.1(4)(b) of the Income Tax Act. You report the deemed sale on Form T1243, list what you own on Form T1161 once it tops $25,000, and you can elect to defer the payment. Skipping T1161 can cost up to $2,500 even in a year with no tax owing.

What does the CRA deem you to have sold on the day you leave?

Almost everything that isn’t on the exceptions list. Section 128.1(4)(b) deems you to have disposed of each property you own for proceeds equal to fair market value when you stop being a Canadian resident, and paragraph (c) deems you to have immediately reacquired it at that same value. No money changes hands. Canada wants its capital gains tax collected while it still has the right to charge it.

In practice the deemed sale catches your non-registered brokerage account, shares in a private company, crypto, and property held outside Canada (yes, a US brokerage account you opened years ago counts). Private-company shares are usually the biggest number on the form and the hardest to value, so they deserve the earliest start.

This page covers the forms and the math. For what the departure tax is and the planning moves before you leave, start with the concept guide. To run your own numbers first, the departure tax calculator gives an instant estimate and flags which of these forms your file would need.

What is not caught by the deemed disposition?

More than people expect. Canadian real estate stays inside Canada’s tax net, so it sits out the deemed sale. Registered accounts sit out too, because each one is an “excluded right or interest” under s. 128.1(10), and short-term residents get a carve-out for property they brought with them.

Property	Deemed sold on departure?	Why
Non-registered investment account	Yes	Default rule under s. 128.1(4)(b)
Private-company shares	Yes	Default rule, and usually the biggest valuation job
Canadian real estate	No	Excluded as “real or immovable property situated in Canada”; taxed when you actually sell
RRSP, RRIF, TFSA	No	Each is an “excluded right or interest” under s. 128.1(10)
Property you owned before becoming a Canadian resident	No, if you were resident 60 months or less in the 120 months before leaving	Short-term resident exception in s. 128.1(4)(b)

One caution on the registered accounts: they escape the deemed sale, but how the US treats an RRSP or a TFSA after you arrive is its own file, and the answers are different from Canada’s.

Which forms do you actually file, and what happens if you miss T1161?

Two forms go with the final return, and they do different jobs. Form T1243 computes the deemed dispositions: each property, its fair market value on the departure date, its cost base, and the resulting gain, which flows into your return. Form T1161 is just a list of your reportable property on the way out, required by s. 128.1(9) once the total fair market value tops $25,000. You can owe zero tax and still owe the list.

The penalty is why the list matters. A late T1161 costs $25 a day, minimum $100, maximum $2,500, under s. 162(7). It’s an information-return penalty, so it doesn’t care whether the deemed sale produced any tax. A nil-tax departure with a forgotten T1161 still wears the full $2,500 once it’s 100 days late.

Can you defer paying the departure tax instead of paying with the final return?

Yes. Section 220(4.5) lets you elect to defer the departure tax until you actually dispose of the property, with the election made by your balance-due day for the departure year. The form is T1244. Above a floor, the CRA wants security for the deferred amount. Below it, s. 220(4.51) deems adequate security accepted for roughly the first $16,500 of federal departure tax (the formula pegs it to the tax a trust would pay on $50,000 of taxable income).

Question	Pay with the final return	Elect to defer (T1244)
When is the tax due?	Balance-due day for your departure year	When you actually dispose of the property
Security required?	None	None up to about $16,500 of federal departure tax; acceptable security above that
Paperwork	Final return, T1243, T1161	The same, plus the T1244 election by the balance-due day
What triggers the bill later?	Nothing, it’s settled	Selling the property

Deferral doesn’t shrink the tax. It parks it until a real sale, which is often exactly what you want when the gain is a paper number on shares you have no plan to sell.

What does the US do with your cost basis after you move?

By default, nothing helpful. US law sets your basis at what you originally paid (IRC s. 1012), and the CRA’s deemed sale doesn’t change that on its own. Sell after the move and the US measures the gain from your old cost, which means the growth Canada already taxed can get taxed a second time.

The treaty has the fix. Article XIII(7) of the US-Canada tax treaty, as rewritten by the Fifth Protocol lets you elect to be treated in the US as if you had “sold and repurchased the property for an amount equal to its fair market value” right before the deemed sale. Your US basis steps up to the same number Canada taxed, and only the growth after your move stays on the US side. This election gets missed constantly, usually because the US preparer never hears that a Canadian deemed sale happened. On a large portfolio it can be worth more than everything else on this page. We walk the US side of the same gain, in full: what the election does, which return it has to ride on, and the two rules that can disqualify you.

What does the math look like on a real portfolio?

What should I do next?

Put a date on your residency change, then build the one-page list from the practitioner note above: every account and asset, with values and cost bases. That single page becomes your T1161, your T1243, and the record your US preparer will need for the basis election. If the move already happened and the forms didn’t, sooner beats later, because the T1161 penalty clock runs by the day.

If you’d rather have the whole departure year mapped by someone who does this work every week, that’s our departure-year service.

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