Leaving Canada Tax Estimator
Two tax events matter when leaving Canada: the deemed disposition on your non-registered assets at the moment you cease residency, and the tax on later RRSP withdrawals once you're a non-resident. Both are estimated below.
What's Calculated
Two distinct calculations, both relevant for someone leaving Canada:
- Departure tax (Section A): Section 128.1(4) deems you to dispose of most non-registered property at fair market value on the day you cease Canadian residency. Capital gains on the deemed disposition are taxable at 50% inclusion × your marginal rate.
- RRSP withdrawal tax (Section B): Once you're a non-resident, RRSP withdrawals face Part XIII Canadian withholding tax at 25% (lump-sum) or 15% under the treaty (periodic). The same withdrawal is also U.S.-taxable with a foreign tax credit for Canadian tax paid.
Both sections give you estimated tax numbers for the simple case. They're independently useful — model just departure tax, just the RRSP, or both.
Section A — Canadian Departure Tax
Add up the fair market value and the adjusted cost base across all non-registered assets you'd hold at the moment of departure (taxable brokerage, foreign real estate, crypto, etc.). Registered plans (RRSP, TFSA, RESP) are excluded — they aren't subject to deemed disposition.
Section B — RRSP Withdrawal Tax (post-departure, as U.S. resident)
Tax on RRSP withdrawals after you've moved to the U.S. The same numbers apply to RRIFs, LIRAs, and LIFs.
What's Not Covered Here
Several things that materially affect departure and RRSP planning are out of scope:
- Excluded property other than registered plans. Canadian real property (still taxable in Canada later under section 116), inventory of a Canadian business with PE, certain life insurance, and rights to employee benefits aren't subject to departure tax. Foreign real estate generally is caught — assets included in your FMV total are assumed subject to deemed disposition.
- Private corporation shares (CCPCs). Common for business owners. Valuation is fact-specific; the deemed disposition can be enormous; mitigation strategies (estate freeze, butterfly, etc.) require advance planning.
- Section 220(4.5) deferral election. Form T1244 lets you defer departure-tax payment until actual sale, with security posted. This page computes the tax owing; the deferral changes when you pay it, not how much.
- U.S. tax basis step-up on departure. The Canada-U.S. treaty (Article XIII(7)) lets you elect on your U.S. return to be treated as having sold and repurchased property at FMV at the date of departure, matching the Canadian deemed disposition and avoiding double tax on appreciation accrued while Canadian. The election is not automatic — it must be made affirmatively on the U.S. return.
- Lifetime Capital Gains Exemption (LCGE). If your deemed disposition includes qualified small business corporation shares (or qualified farm/fishing property), the LCGE — $1,250,000 for 2024 and 2025; $1,275,000 indexed for 2026 — can shelter a chunk of the gain. The rules are complex (QSBC tests, holding period, etc.).
- RRSP planning before withdrawal. When you withdraw, what you withdraw, RRIF conversion timing, treaty election documentation — these change the answer materially.
- U.S. arrival tax on RRSP appreciation. The U.S. tax base for RRSP distributions starts at FMV when you became a U.S. tax resident (under treaty election). Distributions are taxed only on the portion accrued after that date — a key reason RRSP withdrawals are often less U.S.-taxable than people expect.
These are exactly the questions our cross-border tax planning services cover in a departure-planning engagement.
Frequently Asked Questions
How is Canadian departure tax calculated?
When you cease to be a Canadian tax resident, you are deemed to have disposed of most non-registered property at fair market value on the departure date. Capital gains (FMV minus adjusted cost base) are included at 50% inclusion rate and taxed at your marginal rate as Canadian-source income on your final emigrant T1 return.
Are RRSPs subject to departure tax?
No. RRSPs, RRIFs, TFSAs, RESPs, and most other registered plans are excluded from the deemed disposition rules under section 128.1(4)(b). They continue under their normal Canadian tax rules. The tax consequences come later — when you actually withdraw funds from the plan as a non-resident.
What's the tax on RRSP withdrawals after I move to the U.S.?
Lump-sum RRSP withdrawals by non-residents face a flat 25% Canadian withholding tax (Part XIII). Periodic pension payments under the Canada-U.S. Treaty Article XVIII can be reduced to a 15% withholding rate. The withdrawal is also taxable on your U.S. return as ordinary income, with foreign tax credit available for the Canadian withholding paid.
Can I defer paying the departure tax?
Yes. You can elect under section 220(4.5) (Form T1244) to defer payment of the departure tax until you actually dispose of the property. The election requires posting security with the CRA equal to the deferred tax. Security is generally not required if the deferred federal tax is $16,500 or less ($13,777.50 for former Quebec residents).
This tool estimates the Section 128.1(4) deemed-disposition tax on the property mix you enter. It does not analyze excluded property categories (Canadian real estate, registered plans, certain business property), the security/deferral election under Section 220(4.5), provincial surtaxes, or any U.S.-side step-up planning. It is not tax advice and should not be relied upon for filing decisions. Consult a qualified tax professional before acting on the result.
Departure Planning is Best Done in Advance
The departure-tax bill can be reduced — sometimes dramatically — with planning before you actually cease residency. RRSP timing strategies, U.S. cost-base step-up, deferral elections, asset rebalancing all matter. Book a consultation if you're considering the move.