Legally reviewed by Joseph Mayo, Principal Attorney (Ontario and New York).
The tax implications of moving from Canada to the US arrive in a specific order, and the order is what catches people out. Canada settles up with you as of the day you stop being a resident. The United States starts counting from the day you arrive. Sitting between those two dates is a short list of forms, elections and deadlines that are easy to miss while you are arranging a lease and a school placement.
The expensive part is rarely the tax itself. It is a penalty on a form nobody mentioned, or an election that lapsed on 30 April while the boxes were still unpacked. This guide sets out what each country actually requires, with the figures taken from the Canada Revenue Agency, the IRS and the New York State Department of Taxation and Finance as of July 2026.
Quick answer
When you leave Canada, the CRA treats most of your property as sold at fair market value on your date of departure, and tax can be owing on the resulting gain even though nothing was sold. The United States then taxes you as a resident from the point you meet the green card test or the substantial presence test.
When do you actually stop being a Canadian tax resident?
Residency for Canadian tax purposes is a question of fact, not a box you tick on a form. The CRA says the most important consideration is whether you maintain or establish significant residential ties with Canada. It lists three: a home in Canada, a spouse or common-law partner in Canada, and dependants in Canada.
Secondary ties matter too, and they are the ones people forget to deal with. The CRA’s list includes personal property such as a car or furniture, social ties such as memberships in Canadian recreational or religious organisations, economic ties such as Canadian bank accounts or credit cards, a Canadian driver’s licence, a Canadian passport, and health insurance with a Canadian province or territory.
The date itself follows a rule. When you leave Canada to settle in another country, the CRA says you usually become a non-resident on the latest of the date you leave Canada, the date your spouse or common-law partner and dependants leave Canada, and the date you become a resident of the country you settle in. A founder who flies to New York in March while the family stays in Toronto until July does not have a March departure date. You report the date in the Residence Information area on page 1 of your Canadian return.
If your facts are genuinely unclear, Form NR73, Determination of Residency Status (leaving Canada), asks the CRA to review them. Read the output for what it is. The CRA describes it as its opinion, not a binding ruling.
What is Canada’s departure tax and what does it apply to?
There is no separate departure tax statute. The effect comes from a deeming rule: if you ceased to be a resident of Canada in the year, you are treated as having disposed of certain property at fair market value when you left and to have immediately reacquired it for the same amount. That deemed disposition can create a capital gain on assets you still own, which is why the informal name stuck.
It applies to most property, with four exceptions the CRA sets out. Canadian real or immovable property, Canadian resource property and timber resource property are outside it. So is Canadian business property, including inventory, where the business is carried on through a permanent establishment in Canada. So are registered and pension-type holdings, which the Income Tax Act groups as excluded rights or interests under subsection 128.1(10): RRSPs, RRIFs, RESPs, RDSPs, TFSAs, pension plans, annuities and a longer list besides. The fourth exception covers property you owned when you last became a Canadian resident, or inherited afterwards, if you were resident in Canada for 60 months or less during the 10 years before you emigrated. That last one matters for people who came to Canada recently and are leaving again.
Two forms carry the reporting. Form T1243 calculates the gain or loss on the deemed disposition, and the result goes on Schedule 3 with your other capital gains. Form T1161 is the one that surprises people: if the fair market value of all the property you owned when you left Canada was more than CAD 25,000, you list every property inside and outside Canada and attach it to your return.
Cash and bank deposits are left off the T1161 list, as are the registered plans, the 60-month property described above, and any item of personal-use property worth less than CAD 10,000. The penalty for filing it late is CAD 25 for each day, with a minimum of CAD 100 and a maximum of CAD 2,500. The CRA is explicit that even if you do not have to file a return, you must still send Form T1161 by your filing due date.
Can you defer the departure tax?
Yes, and the election is more generous than most people expect. You can elect to defer payment of the tax on income relating to the deemed disposition, regardless of the amount, and pay it later without interest when you actually sell the property. The election is made on Form T1244 under subsection 220(4.5) of the Income Tax Act. It does not apply to the deemed disposition of an employee benefit plan.
The deadline is the part that fails. You must make the election by 30 April of the year after you emigrate from Canada. If the federal tax owing on the deemed disposition income is more than CAD 16,500, or more than CAD 13,777.50 for former residents of Quebec, you have to provide adequate security to cover it, and you may also be asked to provide security for provincial or territorial tax. The CRA asks you to make those arrangements before 30 April, which means the conversation starts well before the deadline, not on it.
One more provision is worth knowing if the move might not be permanent. If you later re-establish Canadian residency, you can elect to unwind the deemed disposition you reported when you left, which can reduce or eliminate the earlier gain.
When do you become a US tax resident?
The US uses two tests. The green card test is straightforward. The substantial presence test counts days, and it counts them across three years.
To meet it, you must be physically present in the United States for at least 31 days during the current year and 183 days across the three-year period made up of the current year and the two years immediately before it, counting all the days in the current year, one third of the days in the first prior year, and one sixth of the days in the second prior year. The IRS example is useful: 120 days in each of three consecutive years produces 120 plus 40 plus 20, which is 180, and therefore no residency under the test.
One exclusion is written for Canadians specifically. Days you commute to work in the US from a residence in Canada do not count, if you regularly commute. Days in the US for less than 24 hours in transit between two places outside the country, days as a crew member of a foreign vessel, and days you cannot leave because of a medical condition that develops in the US are also excluded.
If you arrive partway through a year and do not meet the test for that year, the first-year choice may let you be treated as a US resident for part of it. It requires presence in the US for at least 31 days in a row in the current year, and presence for at least 75% of the days from the first day of that 31-day period to the end of the year, treating up to five days of absence as days of presence. Your residency starting date becomes the first day of that 31-day period. The IRS notes two things worth repeating: once made, the choice cannot be revoked without IRS approval, and if you do not follow the procedure for making it you are treated as a nonresident for the entire tax year.
The year of arrival is usually a dual-status year, and dual-status filing carries real restrictions. You cannot use the standard deduction, although you can itemise allowable deductions. You cannot use the head of household tax table column or rate schedule. You cannot file a joint return, with one exception: a dual-status individual married to a US citizen or resident may elect to file jointly with that spouse. Where that election is made, the IRS confirms the special dual-status instructions and restrictions no longer apply. Whether it produces a better result depends entirely on the numbers, which is a question for a cross-border tax preparer rather than a lawyer.
What will you have to report on your Canadian accounts?
This is where the compliance burden of moving from Canada to the US lands, and it lands on accounts that felt entirely ordinary while you lived in Toronto or Vancouver.
The FBAR comes first. A US person must file FinCEN Form 114 to report a financial interest in, or signature or other authority over, at least one financial account located outside the United States if the aggregate value of those accounts exceeded USD 10,000 at any time during the calendar year. It is an annual report due 15 April, with an automatic extension to 15 October that you do not need to request. It is filed electronically through FinCEN’s BSA E-Filing System and is not filed with your federal tax return.
Form 8938 sits alongside it under FATCA, with higher thresholds and a different form. For a taxpayer living in the United States, the thresholds are more than USD 50,000 on the last day of the tax year or more than USD 75,000 at any time during the year if unmarried, and more than USD 100,000 or USD 150,000 respectively for married taxpayers filing a joint return. Married taxpayers filing separately use the same figures as unmarried taxpayers. If you are not required to file an income tax return for the year, you do not need to file Form 8938 even if you are over the threshold.
A Canadian portfolio, a chequing account left open for a mortgage payment and an RRSP can clear USD 10,000 between them without feeling like offshore wealth. Aggregation is the point people miss.
What happens to your RRSP, TFSA and Canadian rental property?
Each of the three behaves differently, and only one of them is genuinely tidy.
RRSPs and RRIFs
On the US side, the position improved in 2014. Under Revenue Procedure 2014-55, an eligible individual who did not previously make the election under Article XVIII(7) of the Canada-US treaty is treated as having made it, so US tax on income accruing inside the plan is deferred until distribution. Form 8891 was made obsolete as of 31 December 2014 and is no longer required for any year. The word automatic needs a qualification: the treatment applies to eligible individuals as defined in the revenue procedure, which among other things requires that the undistributed earnings were not previously reported as gross income on a US return. The revenue procedure also states expressly that it does not affect Form 8938 or FBAR obligations for those accounts.
On the Canadian side, RRSP and RRIF payments are Part XIII income. For non-residents, withholding on an RRSP withdrawal is 25% unless reduced by a treaty. Be careful with the widely repeated 15% figure. Article XVIII(2)(a) of the Canada-US convention caps the tax at 15% of the gross amount where a resident of the other state is the beneficial owner of a periodic pension payment, and the CRA’s Information Circular IC76-12R8 puts RRSP payments before maturity and full or partial commutation payments outside the definition of a periodic pension payment. Whether a particular withdrawal qualifies is a fact question, not a default.
TFSAs
You may keep a TFSA after becoming a non-resident, and income earned inside it is not taxed in Canada. What you cannot do is contribute. Any contribution made after you become a non-resident is a taxable non-resident contribution, subject to a tax of 1% for each month it remains in the account. If that contribution also exceeds your available contribution room, the CRA can impose two separate 1% monthly taxes on the same account. No new contribution room accrues for a year in which you are a non-resident for the whole year, although you receive the annual dollar limit for a year in which you are resident for part of it. The US treatment of a TFSA is a separate question and is not settled by the Canadian rules.
Keeping the Canadian house and renting it out
Rental payments to a non-resident are Part XIII income, and the usual Part XIII rate is 25% unless a treaty reduces it. Without an election, 25% is withheld on your gross rent and that withholding is your final Canadian tax obligation, with no return required. Gross means gross: no deduction for the mortgage interest, the property tax or the roof.
The section 216 election lets you pay tax on net rental income instead. To reduce the withholding during the year, you and your Canadian agent complete Form NR6 and send it to the CRA for approval on or before 1 January of each year, or before the first rental payment is due. Your agent must keep withholding on the gross amount until the CRA approves the NR6 in writing. Once approved, the agent withholds 25% on the net amount, and you must file a section 216 return on or before 30 June of the following year. Miss that date and the CRA treats the election as invalid. Where no NR6 was approved and tax was withheld on gross rents for the whole year, the section 216 return is generally due within two years from the end of the year the rent was paid or credited.
Does New York add another layer?
It does, and state residency does not follow the federal rules. New York treats you as a resident for income tax purposes if your domicile is New York State, or if you maintain a permanent place of abode in New York State for substantially all of the taxable year and spend 184 days or more in the state during the year. Any part of a day counts as a day for that purpose.
A permanent place of abode is a residence you permanently maintain, whether you own it or not, that is suitable for year-round use, and it usually includes a residence your spouse owns or leases. New York City and Yonkers apply the same definitions with the city substituted for the state, so an apartment in Manhattan can pull you into both a state and a city residency analysis at once.
The practical consequence for a Canadian arriving in New York is that three residency questions run in parallel: Canadian residency under the CRA’s ties test, US federal residency under the substantial presence test, and New York State and City residency under the domicile and day-count tests. They can produce different answers for the same calendar year. Anyone advising you on only one of the three is answering part of the question.
| Residency question | The test that answers it | Source and date |
|---|---|---|
| Are you still a Canadian tax resident? | A question of fact. The CRA looks first at significant residential ties: a home in Canada, a spouse or common-law partner in Canada, and dependants in Canada, supported by secondary ties. Non-residence usually begins on the latest of your departure date, your family’s departure date, and the date you become a resident of your new country. | CRA, Determining your residency status and Leaving Canada (emigrants), pages modified 20 January 2026 |
| Are you a US federal tax resident? | The green card test, or the substantial presence test: at least 31 days in the current year and 183 days across three years, counting all current-year days, one third of the first prior year and one sixth of the second prior year. | IRS, Substantial presence test, page updated 14 March 2026 |
| Are you a New York State or City resident? | Domicile in New York State, or a permanent place of abode maintained in New York for substantially all of the taxable year together with 184 days or more spent in the state. Any part of a day counts as a day. | New York State Department of Taxation and Finance, Income tax definitions, updated 6 May 2025 |
What should a business owner watch in particular?
If you own shares in a Canadian corporation, the deemed disposition on emigration reaches them, and valuing private shares at fair market value on a specific date is not a form-filling exercise. The Form T1244 deferral election exists precisely because that gain can be large and entirely unrealised.
If you are moving to run or start a US business rather than to take a job, the structure question and the immigration question have to be answered together, because the entity you choose affects both. Our guide on how to start a business in both Canada and the US covers the structural side, and whether you can form an LLC in Ontario deals with the entity mismatch that trips up most cross-border founders. Where US operations earn foreign-derived income, the Section 250 deduction may be relevant to the corporate return, which is a separate analysis from anything on your personal return.
For the immigration side of the same move, our business immigration practice covers the visa categories, and the wider guide to moving from Canada to the USA sets out the relocation and visa sequence that this article sits underneath. If the move is employment-based and permanent residence is the destination, see how to get a green card through employment.
Frequently asked questions
What are the main tax implications of moving from Canada to the US?
Three sit at the centre. Canada treats most of your property as sold at fair market value on your date of departure, which can create a capital gain on assets you still hold. The United States begins taxing you as a resident once you meet the green card test or the substantial presence test. And your ordinary Canadian accounts become foreign financial accounts that may have to be reported on the FBAR and on Form 8938.
Do I pay tax twice on the same income?
Double taxation is what the Canada-US tax treaty and the foreign tax credit rules are designed to prevent, but relief is claimed, not automatic. In the year of the move you may have a Canadian return covering the period to your departure date and a US return covering your period of US residency, with credits claimed so the same income is not taxed twice in substance. Getting the two returns to line up is the work, and it is work for a cross-border tax preparer.
How much is the Canadian departure tax?
There is no fixed rate or fixed amount. The tax is whatever is payable on the capital gain produced by the deemed disposition, calculated with your other income at your marginal rate for the year of departure. That is why the figure varies so widely between two people leaving on the same day. If the resulting federal tax is more than CAD 16,500, and you want to defer payment, security is required.
Can I keep my RRSP after I move to the United States?
Yes. There is no requirement to collapse an RRSP on emigration, and it is one of the excluded rights or interests that the deemed disposition does not reach. For US purposes, Revenue Procedure 2014-55 treats eligible individuals as having elected to defer US tax on income accruing in the plan. The account may still have to be reported on the FBAR and on Form 8938, which the revenue procedure states expressly.
What happens to my TFSA if I move to the US?
You may keep it, and income earned in the account is not taxed in Canada. Contributions are the problem. Any amount you contribute after becoming a non-resident is a taxable non-resident contribution carrying a tax of 1% per month for each month it stays in the account, and a second 1% monthly tax can apply if it also exceeds your contribution room. Contribution room does not accrue for a year in which you are a non-resident throughout.
What is the deadline to elect to defer the departure tax?
30 April of the year after you emigrate from Canada. The election is made on Form T1244. If the federal tax owing on the deemed disposition income exceeds CAD 16,500, or CAD 13,777.50 for former Quebec residents, adequate security must be provided, and the CRA asks that the arrangements be made before that date rather than on it.
Does a Canadian who commutes to work in the US become a US tax resident?
Not on those days alone. The IRS excludes days you commute to work in the US from a residence in Canada from the substantial presence test count, provided you regularly commute. That exclusion applies to the day count only. It does not answer the separate questions of where your employment income is taxable or whether a state such as New York treats you as a resident.
Do I need to file Form T1161 if I do not owe any tax?
Yes, if you are over the threshold. Form T1161 is required where the fair market value of all the property you owned when you left Canada was more than CAD 25,000, and the CRA states that you must send it by your filing due date even if you do not have to file a return. Filing late attracts CAD 25 per day, with a minimum of CAD 100 and a maximum of CAD 2,500.
Conclusion
The tax implications of moving from Canada to the US are mostly a sequencing problem. Your departure date is set by facts you can plan around, the deemed disposition is measured on that date, the deferral election closes on 30 April of the following year, and the US reporting obligations attach from the point you become a US resident. None of these steps is difficult in isolation. They become expensive when they are handled in the wrong order or discovered after the fact.
Figures cited here are current as of July 2026 and are stated in the currency each authority uses. Fee schedules, thresholds and treaty positions change, so check the position that applies to your own departure year before acting.
How Mayo Law can help
Mayo Law is a cross-border firm with offices in Toronto and New York. Joseph Mayo, the firm’s principal attorney, is licensed in Ontario and New York, which means the immigration structure and the entity structure on both sides of a move can be considered together rather than in sequence by two firms who never speak.
We advise on the legal side of a relocation: the visa or status category, the corporate structure that will hold a US business, shareholder and employment arrangements that survive the move, and the documentation the two systems each expect. We work alongside cross-border tax advisers on the return preparation and tax planning, and we will say plainly where an accountant rather than a lawyer should be answering. To discuss a planned move, see our business immigration services or the firm’s cross-border practice.
Disclaimer
This article is for general information only and is not legal or tax advice. It does not create a solicitor-client or attorney-client relationship, and it does not take account of your circumstances. Tax rules, thresholds and filing deadlines change, and the figures given are stated as of July 2026 from the sources named. You should obtain advice on your own facts before acting. Legal services are provided through Mayo Law PC in Ontario and Joseph Mayo PLLC in New York.
