Moving from Canada to the US: Tax Checklist for the Year You Emigrate

Leaving Canada is a taxable event. Unlike the US, which taxes based on citizenship, Canada taxes based on residency, and the price of ending that residency is an immediate reckoning with every unrealized gain you have accumulated. ITA 128.1(4) deems you to have disposed of most capital property at fair market value on the day you cease to be a Canadian resident. The resulting capital gains are taxed on your final Canadian return. This “departure tax” is the single most consequential tax event in a Canada-to-US move, and it catches many people off guard because nothing is actually sold.

What triggers the deemed disposition?

The deemed disposition under ITA 128.1(4) applies when you cease to be a Canadian resident. You cease to be resident when you sever your residential ties: selling or renting out your home, moving your spouse and dependents, cancelling provincial health insurance, closing Canadian bank accounts (or reducing them to minimal balances), and establishing residential ties in the US.

The CRA determines your departure date based on the facts. For most people, it is the date they leave Canada with the intent to establish a permanent home elsewhere. If you move on August 15 and your family joins you on September 1, the CRA may use either date depending on when the primary ties were severed. Filing Form NR73 (Determination of Residency Status on Leaving Canada) gives you a formal ruling, though it is optional and can take months.

Property subject to the deemed disposition includes:

• Publicly traded stocks and securities
• Private company shares
• Partnership interests
• Mutual funds and ETFs
• Foreign property (US stocks, UK investments, etc.)
• Personal-use property worth more than $10,000 (art, jewelry, collectibles)

Property excluded from the deemed disposition:

• Canadian real property (including the principal residence)
• Property used in a Canadian business through a permanent establishment
• RRSPs, RRIFs, and other registered retirement plans
• TFSAs
• Stock options (generally not “property” for this purpose if unvested)

The excluded property remains taxable in Canada when it is eventually sold or withdrawn. Canadian real property is taxable Canadian property (TCP), and any future gain is reported on a Canadian return under ITA 2(3). RRSP/RRIF withdrawals as a non-resident are subject to Part XIII withholding (25% domestic, reduced to 15% by the treaty).

Can you defer the departure tax?

Yes. ITA 220(4.5) allows you to post acceptable security with the CRA (a bank letter of credit, a pledge of Canadian assets, or other security the CRA accepts) and defer the departure tax until you actually dispose of the assets. The security must be sufficient to cover the deferred tax plus interest.

While the tax is deferred, no interest accrues on the deferred amount (unlike most other CRA deferrals). This makes the security election attractive for taxpayers with large unrealized gains on assets they do not intend to sell immediately.

To elect, file Form 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) with your departure-year return.

If you return to Canada within a few years, you can elect under ITA 128.1(6) to unwind the deemed disposition, as if it never happened. This is a full reversal: the gains are removed from the departure return, and the security is released. This unwinding election must be filed within the return-filing deadline for the year of re-establishment of Canadian residency.

What happens with your RRSP and TFSA after you leave?

RRSP/RRIF: Your RRSP remains in Canada and continues to grow tax-deferred. Withdrawals as a non-resident are subject to Part XIII withholding at 25% (domestic rate), reduced to 15% by the treaty. You cannot make new contributions after you leave (you lose RRSP contribution room when you stop earning Canadian income). On the US side, you include RRSP withdrawals in US income and claim a foreign tax credit for the Canadian withholding.

The treaty (Article XVIII(7)) allows deferral of US tax on income accruing in the RRSP while you are a US resident. This deferral is now automatic under Rev. Proc. 2014-55 (the old Form 8891 election is no longer required).

TFSA: The TFSA loses its tax-free status when you become a non-resident. Canada does not tax the TFSA on departure (no deemed disposition), but you cannot make new contributions, and the US does not recognize the TFSA as a tax-sheltered account. Ongoing earnings in the TFSA may be taxable on your US return. The CRA does not impose departure restrictions on the TFSA, so you can withdraw the full balance tax-free from Canada’s perspective before or after leaving.

The practical advice: withdraw the TFSA before or shortly after departure. Holding a TFSA as a US resident creates ongoing US reporting obligations (potential Form 3520/3520-A as a foreign trust) with no tax benefit in either country.

What is the US basis for assets you bring with you?

The US establishes your cost basis for all assets at FMV on the date you become a US resident. This mirrors the Canadian deemed-disposition amount. The result: neither country taxes the pre-immigration gains, and neither country misses the post-immigration gains.

If you become a US resident on July 1, 2025 (the same date you cease to be a Canadian resident), the Canadian deemed-disposition FMV and the US cost basis FMV are the same number. There is no gap. Any gain after July 1 is taxed by the US, and any gain before July 1 was taxed by Canada on the departure return.

The US basis is established regardless of the Canadian departure tax. Even if you post security and defer the Canadian tax, the US basis is still the FMV on the date of US residency. You are not taxed twice on the same gain.

For Canadian real property (which was excluded from the deemed disposition), the US basis is also FMV on the date of US residency. If you sell the Toronto house after moving to the US, the US taxes only the gain above the FMV on your residency date. Canada also taxes the gain (it is taxable Canadian property), and you claim foreign tax credits to prevent double taxation.

What Canadian returns must you file after leaving?

Even after leaving Canada, you may need to file Canadian returns:

• Section 216 return if you have Canadian rental income (you must file annually while you own the property, or arrange NR6 withholding)
• T1 return if you sell taxable Canadian property (Canadian real property, shares of Canadian private corporations)
• ITA 116 clearance certificate if you sell taxable Canadian property (the buyer withholds 25% of the sale price unless a clearance certificate is obtained)
• Non-resident withholding return if you receive Canadian-source income subject to Part XIII withholding (dividends, royalties, pension income)

The CRA tracks your departure through Form NR73 (if filed) or through the departure indicators on your final T1 return. Once you are classified as a non-resident, your future obligations are limited to Canadian-source income.

What is the first-year US checklist?

1. Determine your US residency start date. If you enter on a visa that leads to a green card, the residency start date is generally the first day of presence in the US. If you enter on a green card, it is the first day of presence as a lawful permanent resident.
2. File a dual-status return or full-year return for the arrival year. You can elect to file a full-year US return (treating yourself as a resident for the whole year) if it produces a better result (allows the standard deduction and joint filing). The election under Reg 1.6013-6(a) requires the spouse to consent to US taxation on worldwide income.
3. Establish FMV documentation. Get statements, appraisals, and valuations for every asset as of the US residency start date. This is your US cost basis.
4. Report foreign accounts. File FBAR (FinCEN 114) for Canadian bank and investment accounts over $10,000 aggregate. File Form 8938 if assets exceed FATCA thresholds.
5. Decide on Canadian accounts. RRSP: leave in Canada (treaty-protected deferral). TFSA: withdraw (no US tax benefit). Non-registered accounts: decide whether to consolidate to a US brokerage (may trigger Canadian withholding on redemptions).
6. Apply for US Social Security number (SSN). If you entered on a visa that authorizes employment, apply for an SSN at the Social Security office. If not, apply for an ITIN (Individual Taxpayer Identification Number) using Form W-7.
7. State tax. Register in your new state. If the state has income tax, you are a part-year resident for the arrival year and file a part-year return.

Related guides

• What is Canada’s departure tax, and what does it actually catch?, how the deemed disposition on emigration works and what it costs
• Pre-move tax planning, what to do before you cross the border to minimize the departure tax hit

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