What to Do If I Leave Canada as a Tax Resident - How to become non-resident for Canadian taxes

‍Written by someone who’s walked clients through this more times than he can count.

I see this question all the time on Reddit, in Facebook groups, and even from clients who call me from the airport:
“I'm moving to the U.S. (or the UK, or Dubai, or wherever). What do I need to do now for my Canadian taxes?”

Turns out, leaving Canada for tax purposes isn’t just a matter of packing your bags. There’s real paperwork, forms, and tax consequences. Here's a general checklist, plus some hard-earned commentary from a CPA who's helped people navigate this many times.

1. Set Your Departure Date

This is the date you officially become a non-resident for tax purposes. CRA looks at your residential ties — your home, spouse, dependents, driver’s license, health card, etc. If most of those are gone, or transferred to another country, you're probably non-resident from that date.

This date sets the clock for everything that follows, including tax triggering events on the day you depart.

2. File a "Final" Canadian Tax Return

Your final return includes:

• Your departure date (right on the form)
• All worldwide income earned up to that date
• A deemed disposition on most taxable assets — as if you sold everything the day you left (even if you didn’t)

You'll also need to file:

• Form T1161 – listing all your property (even if there’s no tax owing)
• Form T1243 – calculating any capital gains from your deemed disposition

This is how CRA triggers departure tax, a tax on gains that haven't actually been realized.

3. Understand Departure Tax

Departure tax is CRA’s way of saying:
"If you’re going to leave Canada with appreciated assets, we want our cut before you go."

You’ll pay tax on things like:

• Non-registered investment accounts
• Shares and ETFs
• Certain personal-use property worth over $10,000

What’s not taxed on departure:

• Your RRSPs, RRIFs, pensions — still deferred
• Canadian real estate — not deemed disposed, but still taxed when sold
• Personal items under $10K (like your furniture or clothes)

You can elect to defer the departure tax, but you may need to post security.

4. File Tax Returns in Your New Country

Once you land in your new country — the U.S., Australia, Portugal, wherever — you're on the hook to report worldwide income there, too.

For U.S. filers, you'll likely do:

• A dual-status return (part-year Canadian, part-year American)
• Use foreign tax credits to avoid double taxation
• Watch for overlap periods — when income might fall under both countries’ jurisdiction

Treaties help, but you need to file things properly to claim those benefits.

5. Tell CRA You’ve Left — and Update Your Address

Don't ghost the CRA. Your departure date should be clearly stated on your return, and you should update your mailing address (to an international address) with CRA.

6. Notify Your Banks and Brokerages

Once you’re non-resident, your Canadian financial institutions are legally required to:

• Apply non-resident withholding tax on investment income (typically 25%)
• This rate may be reduced to 15% or even 0% depending on the tax treaty (e.g., with the U.S.)

But they won’t apply the treaty rate unless you tell them you’re non-resident and fill out the NR301 form.

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7. Deal with TFSA, RESP, and FHSA Before You Leave

These are Canada-only tax shelters. In most other countries — especially the U.S. — they’re just regular taxable investment accounts.

• TFSA and FHSA: Usually lose their tax-free status immediately and become a tax headache.
• RESP: Not tax-deferred in most countries, and triggers extra reporting forms.

Your safest bet? Collapse them before you leave. Clean break.

8. RRSPs — Watch Out for U.S. State-Level Tax

The RRSP is fine to keep — the Canada-U.S. Tax Treaty recognizes its tax-deferred status.

But some U.S. states don’t follow the treaty:

California, New Jersey, Pennsylvania, Connecticut, Maryland, Alabama, Mississippi, North Dakota, Arkansas, Hawaii

If you’re moving to one of these states, your RRSP income might be taxed at the state level even if the IRS defers it.

9. Watch for Foreign Reporting Rules (FBAR, FATCA, etc.)

If you now live in the U.S. and you still hold:

• Canadian bank accounts
• RRSPs or other investments
• Property or anything with $$ value

You probably need to file:

• FBAR (Report of Foreign Bank and Financial Accounts) if you have $10,000 USD or more combined in foreign accounts
• Form 8938 (FATCA) — similar idea, for high net worth reporting

10. Stop Your Provincial Health Coverage

Each province is different — but the rule of thumb is this:
If you're not living here, you're not covered.

Let your province know. Otherwise, they’ll keep billing or sending mail and assume you’re still around.

11. Let Your Accountant Know (Before You Leave)

Ideally, talk to someone before you move. Not after. A tax advisor with cross-border experience can help you:

• Time your departure to avoid exit tax surprises
• Collapse accounts (TFSA, RESP) the right way
• Avoid missing deadlines or triggering unnecessary audits
• File properly in both countries

Also, get clarity on what you'll still have to report moving forward — rental property? investments? pensions? It all matters.

Final Word

Leaving Canada as a tax resident isn’t casual. There’s a checklist. There’s paperwork. There’s tax.

If you’ve got assets, property, or Canadian investments — or if you’re heading to a country with aggressive tax rules like the U.S. — get proper advice. This is one area where guessing can cost you a lot more than a plane ticket.

And if you're reading this and feel overwhelmed? That’s normal.

But this is literally what I do every day — I’ve helped people move to the U.S., Europe, Asia, you name it. So if you’re stuck or just want a second pair of eyes on your situation, feel free to reach out.

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This is not legally binding tax advice. This is educational analysis. Say hello if you need help.

hello@taxesmadesimple.ca

WhatsApp - 613.600.4194

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