Departure Tax When a Client Leaves Canada: the Deemed Disposition, T1243, T1161 and T1244

Published 3 November 2026 by Steffan Kharmaaiarvi, founder

When a client stops being resident in Canada, the Income Tax Act treats most of what they own as sold at fair market value the moment before they leave, and bought back at the same value. This is the departure tax: tax on gains nobody has realised, due with the return for the year of departure. For an adviser the work is to know which accounts are caught, which forms follow, and whether the client should defer the tax. This note sets out the rules from section 128.1 and CRA's guidance, an illustrative worked example and what Borderfolio shows. It is decision support for professional review, not tax advice.

The deemed disposition

Under s. 128.1(4)(b) of the Income Tax Act, a taxpayer who ceases to be resident is deemed to have disposed of each property they own, immediately before leaving, for its fair market value, and to have reacquired it at that value. CRA's page on dispositions of property for emigrants describes the same rule. Gains and losses on the deemed disposition are calculated on Form T1243 and reported on Schedule 3.

What is not caught

For an individual, the Act excludes:

• Real or immovable property in Canada, Canadian resource property and timber resource property.
• Property of a business carried on through a permanent establishment in Canada.
• An "excluded right or interest" (s. 128.1(10)), which lists, among others, an RRSP, RRIF, RESP, RDSP, TFSA, FHSA, a superannuation or pension plan, and a foreign retirement arrangement (a US traditional IRA). The registered accounts are not deemed sold; payments out of them to a non-resident bear Part XIII tax instead (s. 212(1)(l) and (q)) (see Part XIII withholding after leaving).
• The 60-month rule. If the client was resident in Canada for no more than 60 months in the 120 months before leaving, property they owned when they last became resident (or inherited since) is excluded (s. 128.1(4)(b)(iv)). This matters for clients on a short posting.

Items in the first two groups can be brought in by election (Form T2061A). A loss on the deemed disposition is not a superficial loss: s. 128.1 is in the list of exceptions in the s. 54 definition.

The forms

For the T1161 value, CRA leaves out cash (including bank deposits), registered and pension-type arrangements, property covered by the 60-month rule, and personal-use property with a fair market value of less than CAD 10,000.

A worked example (illustrative)

A client resident in Canada since 2008 leaves for the UK on 30 June 2026. Round, illustrative figures in CAD:

• Net deemed gain: 60,000 − 10,000 = CAD 50,000.
• Taxable part: at the 50% inclusion rate CRA's Guide T4037 gives for 2025, 50,000 × 50% = CAD 25,000.
• T1161: property counted is 180,000 + 50,000 = CAD 230,000, above CAD 25,000, so the list is due with the 2026 return.
• T1244 and security: at an illustrative federal rate of 33% on the taxable part, federal tax is 25,000 × 33% = CAD 8,250, below CAD 16,500, so the client could elect to defer without posting security for the federal tax. Provincial tax and the client's actual marginal rate are separate questions.

The UK side (how the UK treats the shares' cost on arrival, temporary non-residence) is a separate review; see planning a client's relocation.

What Borderfolio shows

With a planned destination on the client's profile, the Cross-Border tab adds the finding Canadian departure tax:

• Deemed gain and taxable part on the holdings in taxable accounts, at today's prices and exchange rates, from the Canadian ACB replayed from the confirmed transactions (average cost pooled across non-registered accounts, each purchase at its own date's rate, with the issuers' return of capital and reinvested distributions for catalogued Canadian ETFs).
• Accounts left out: RRSP, RRIF, TFSA, FHSA, LIRA, LIF, RESP and RDSP, and US retirement accounts (a traditional IRA as a foreign retirement arrangement; a 401(k) and a Roth IRA as pension plans, the Roth being a labelled reading of s. 128.1(10)(a)(viii)).
• The 60-month rule from the profile's "resident since": if residence is 60 months or less, holdings owned on arrival are left out (assuming no earlier Canadian residence in the ten years).
• The filings in order: T1243, T1161 when the value is above CAD 25,000, and the optional T1244 deferral with its security threshold.
• Gaps shown: a holding whose cost is not known (bought before the imported history) is named and no total is given.

Not modelled: the tax itself (it depends on the client's marginal rate and province), assets outside the confirmed accounts, the departure date's prices (the figure moves with the market until then), and the elections under T2061A. See the relocation documentation and the limits of the cross-border screens.

Frequently asked questions

Is an RRSP subject to departure tax?

No. An RRSP, RRIF, TFSA, FHSA, RESP and RDSP are excluded rights or interests under s. 128.1(10) and are not deemed disposed when the client leaves. Later payments to the non-resident are subject to Part XIII withholding.

When is Form T1161 required?

When the fair market value of all the property the client owned on leaving Canada is more than CAD 25,000, leaving out cash, registered and pension-type plans, property covered by the 60-month rule and personal-use property worth less than CAD 10,000. Late filing costs CAD 25 a day, from CAD 100 to CAD 2,500.

Can the departure tax be deferred?

Yes, by electing on Form T1244 by 30 April of the year after departure. The tax is then paid, without interest, when the property is sold. Security is required if the federal tax on the deemed disposition is more than CAD 16,500.

What is the 60-month rule?

If the client was resident in Canada for 60 months or less in the 120 months before leaving, property they owned when they last became resident, or inherited afterwards, is not deemed disposed.