How Does the CRA Determine Tax Residency?

Canada determines tax residency based on facts, not citizenship and not a fixed number of days. The CRA looks at your residential ties to Canada (where your home is, where your spouse and dependants live, where your personal property and social connections are) and makes a judgment about whether you are “ordinarily resident” in Canada under ITA 250(3). If you are, Canada taxes your worldwide income. If you are not, Canada taxes only your Canadian-source income. The test sounds simple, but the “ordinarily resident” standard is factual and subjective, and the CRA’s assessment of your ties can differ from what you assumed your status was.

What are the primary residential ties?

The CRA identifies three primary residential ties. Having any one of these ties in Canada generally makes you a factual resident of Canada, regardless of where you spend most of your time.

1. A dwelling place in Canada. If you maintain a home in Canada that is available to you year-round (whether you own it, rent it, or have a right to live there), this is a primary tie. “Available to you” means you could move back in at any time. A home rented to a third party on a long-term arm’s-length lease may not be “available” to you. A furnished home left vacant, or rented on a short-term basis, is available.

2. A spouse or common-law partner in Canada. If your spouse or common-law partner remains in Canada, this is a primary tie. The CRA treats the location of your spouse as one of the strongest indicators of where your real home is. A person who moves to the US for work but whose spouse and family remain in Toronto is almost certainly still a Canadian resident.

3. Dependants in Canada. If your dependants (typically children) remain in Canada, this is a primary tie. Children enrolled in Canadian schools while a parent works abroad is a common fact pattern that keeps the parent resident in Canada.

What are the secondary residential ties?

The secondary ties are supporting evidence. They are not individually decisive, but the CRA weighs them in context:

• Personal property in Canada (car, furniture, clothing, valuables)
• Social memberships (gym, club, religious organization)
• Canadian bank accounts and credit cards
• Canadian driver’s license
• Canadian health insurance coverage (provincial health card)
• Canadian passport
• Professional memberships or union membership
• Canadian mailing address
• Seasonal residence (a cottage)
• Canadian telephone number

The more secondary ties you have, the stronger the CRA’s case that you are still a resident. No single secondary tie is sufficient on its own, but a full set of secondary ties (bank accounts, driver’s license, health card, social memberships) combined with a home available in Canada makes the case overwhelming.

What is the 183-day deemed resident rule?

ITA 250(1)(a) provides a separate, mechanical rule: if you sojourn (stay temporarily) in Canada for 183 or more days in a calendar year, you are deemed to be a Canadian resident for the entire year. This rule applies regardless of your residential ties. It is a backstop that catches people who spend significant time in Canada without formally establishing residence.

• Sojourn vs reside. “Sojourn” means a temporary stay. If you are already a factual resident (because of residential ties), the 183-day rule is irrelevant: you are already resident. The rule matters for people who have no residential ties but spend extended periods in Canada (snowbirds in reverse, extended family visits, temporary work assignments).
• Full year. If the 183-day rule applies, you are deemed resident for the entire calendar year, not just for the days you spent in Canada. This means worldwide income for the full year is subject to Canadian tax.
• Part-year exception. If you become a resident or cease to be a resident during the year (a move), ITA 114 and 128.1 apply the part-year rules. The 183-day rule does not override a genuine departure or arrival mid-year; it applies to sojourners, not movers.

How does the CRA determine residency when you leave Canada?

Leaving Canada physically is not the same as ceasing to be a Canadian resident. The CRA looks at whether you severed your residential ties, not whether you crossed the border.

To cease being a Canadian resident, you must:

• Sell, rent on a long-term arm’s-length lease, or otherwise make your Canadian home unavailable to you
• Ensure your spouse and dependants also leave Canada (or that the relationship has ended)
• Sever as many secondary ties as practical (close bank accounts, cancel the driver’s license, cancel provincial health coverage, end social memberships)

If you move to the US but keep your Toronto condo furnished and vacant (“just in case”), the CRA will treat you as still resident. If you move your family, sell the condo, and close your Canadian accounts, the CRA will accept that you left.

The NR73 form. You can ask the CRA to rule on your residency status by filing Form NR73 (Determination of Residency Status). This is optional but useful when the facts are ambiguous. The CRA reviews your ties and issues a determination letter. The determination is not binding (you can dispute it), but it provides certainty for filing purposes.

How does Canadian residency interact with US tax?

A US citizen or green card holder living in Canada is subject to both countries’ tax systems:

• Canada taxes you as a resident (worldwide income) based on your residential ties
• The US taxes you as a citizen (worldwide income) based on citizenship, regardless of ties

The treaty tiebreaker under Article IV resolves the dual residency for treaty purposes. For a US citizen living in Canada with a home, family, and economic ties in Canada, the tiebreaker assigns treaty residence to Canada. Canada has the primary taxing right on most income, and the US gives a foreign tax credit.

For a Canadian who moves to the US and severs ties:

• Canada treats you as a non-resident from the date of departure
• The departure tax (deemed disposition on capital property) applies
• The US treats you as a resident (if you have a green card or meet the substantial presence test) from the date of arrival
• Income earned before departure is Canadian-source; income earned after is US-source (for most categories)

How does the CRA handle the transition year?

When you arrive in or depart from Canada mid-year, ITA 114 splits the year into a resident period and a non-resident period. During the resident period, you are taxed on worldwide income. During the non-resident period, you are taxed only on Canadian-source income.

• Arriving. The resident period begins on the date you establish residential ties (move into a home, arrive with your family). Income earned before that date is not subject to Canadian tax (unless it is Canadian-source).
• Departing. The non-resident period begins on the date you sever residential ties. Income earned after that date is not subject to Canadian tax (unless it is Canadian-source). The departure return reports worldwide income for the resident period and any Canadian-source income for the non-resident period.
• Credits and deductions. Personal credits (basic personal amount, spousal amount) are prorated based on the number of days in the resident period.

What are the common mistakes?

• Assuming departure is automatic. Moving to the US does not make you a non-resident if you keep residential ties in Canada. The CRA will treat you as a resident until the ties are severed.
• Keeping a vacant home. A furnished home in Canada that you can move back into at any time is a primary residential tie, even if you do not intend to return.
• Leaving the spouse behind. A spouse who remains in Canada while you work abroad keeps you resident, regardless of how many days you spend outside Canada.
• Confusing the 183-day rule with the US substantial presence test. The Canadian 183-day rule is simpler (calendar-year count, no weighted formula). The US substantial presence test uses a weighted 3-year formula. Meeting one does not mean meeting the other.
• Not filing NR73. When the facts are ambiguous, failing to request a CRA determination creates uncertainty that can be expensive to resolve years later.

What should I do next?

If you are leaving Canada (or recently left), evaluate whether you have actually severed your residential ties. If you are a US citizen living in Canada, your Canadian residency determines how much Canadian tax you pay and how the FTC calculation works on the US side.

• Leaving Canada permanently: tax checklist, the departure process
• Canada departure tax, the deemed disposition on leaving
• Treaty tiebreaker rules, how the treaty assigns residence
• Substantial presence test, the US mechanical residency test
• Splitting time between Canada and the US, the snowbird scenario
• Closer connection exception, the US carve-out for people with stronger ties to Canada
• Digital nomad tax, how travel and remote work interact with the residency test

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