Moving from Ontario Tax Guide 2026: Departure Return, Deemed Disposition & Provincial Tax

KEY INSIGHT

When you leave Ontario (and Canada) and cease to be a Canadian tax resident, you must file a departure return with the CRA — your final T1 for the period up to your departure date. Canada imposes a 'deemed disposition' at fair market value on most worldwide assets on the last day of residency, triggering capital gains on unrealized appreciation. RRSP assets are not subject to deemed disposition — but non-resident withholding applies to future withdrawals. Ontario's provincial income tax (up to 13.16%) applies to the departure year income through the departure date. OHIP coverage ends when you establish residency elsewhere.

At a glance

Key Facts

CRA Deemed Disposition: Tax on Departure

When you cease Canadian tax residency, Section 128.1 of the Income Tax Act deems you to have disposed of all your property at fair market value on the last day of residency. This creates capital gains (or losses) on: Canadian and foreign investment portfolios (stocks, bonds, ETFs); foreign real estate (not Canadian property — Canadian property triggers tax when actually sold, not on deemed disposition); interests in partnerships and trusts; cryptocurrency holdings; business assets not constituting Canadian property. Capital gains tax: 50% inclusion rate (rising to 2/3 for gains above $250,000 for individuals under proposed changes — verify current status); taxed at your marginal rate. Exemptions from deemed disposition: Canadian real property (taxed at actual sale); RRSP/RRIF/DPSP accounts (deferred, taxed on withdrawal); shares in Canadian private corporations in some cases (may elect to defer); personal-use property under $10,000. Planning: review your portfolio before departure; crystallize losses to offset gains; consider whether selling appreciated assets before departure (and paying capital gains at Canadian rates) is better than selling as a non-resident (potentially subject to 25% WHT on future Canadian gains).

Ontario Provincial Tax on the Departure Year

In the departure year, you pay Ontario provincial income tax on your income from January 1 to your departure date. Ontario rates (2025): 5.05% on first $51,446; 9.15% on $51,447–$102,894; 11.16% on $102,895–$150,000; 12.16% on $150,001–$220,000; 13.16% above $220,000. Ontario surtax: 20% on Ontario tax above $5,765; additional 36% on Ontario tax above $7,387 — effectively adds 20–56% to the base Ontario rate for higher earners. Ontario provincial credits: Ontario Tax Reduction (eliminates tax for low-income); Ontario CARE tax credit; Ontario Senior Homeowners' Property Tax Grant. Provincial tax in the departure year is calculated on your Ontario income (for the period you were resident) — the prorated personal credit calculations apply. If you moved from another province to Ontario before departing: you pay provincial tax based on which province you were resident in on December 31 of the year (but the departure return uses departure date, not Dec 31, for province allocation).

RRSP, TFSA, and RESP: What Happens on Departure

Registered accounts have different rules on Canadian departure. RRSP (Registered Retirement Savings Plan): NOT subject to deemed disposition on departure. Future RRSP withdrawals as a non-resident: subject to 25% non-resident withholding (reduced under tax treaties — e.g., Canada-US treaty reduces to 15% for periodic payments, 25% for lump sums; Canada-UK treaty reduces to 25% — check your destination country's treaty). RRSP remains tax-sheltered in Canada; contributions are not possible after departure (no Canadian earned income). TFSA (Tax-Free Savings Account): room stops accumulating after departure. Amounts in the TFSA are not subject to deemed disposition or withholding on departure — but future income inside the TFSA may be taxable in your new country of residence (the US, for example, does not recognize the TFSA tax-free status; TFSA income is US-taxable). RESP (Registered Education Savings Plan): ceasing residency may affect eligibility for the CESG (Canada Education Savings Grant) — government grants may need to be repaid. Simplify RESP holdings before departure if practical.

Ceasing Ontario and Canadian Tax Residency

Canadian tax residency is determined by 'residential ties,' not citizenship or PR status. Residential ties: a dwelling place in Canada; a spouse/dependants remaining in Canada; personal property (furniture, vehicles); social and economic ties (club memberships, professional memberships, bank accounts, provincial health card). Significant residential ties: maintaining a home in Canada (most important tie), having family in Canada. For Ontarians leaving Canada: to cease tax residency, you should: (1) Cancel your OHIP card (your health coverage ends when you leave); (2) Cancel Ontario driver's licence if permanently departing; (3) Close or transfer Ontario bank accounts and investment accounts if practical; (4) Update your address with all financial institutions to your new foreign address; (5) Sell your Ontario home or rent it out (renting creates non-resident rental income obligations). The departure date is the date you leave Canada with the intention to reside elsewhere permanently. Complete a 'Determination of Residency Status (Leaving Canada)' assessment via CRA if uncertain.

The Departure Return: CRA T1 Filing

The departure year T1 return is the most important filing for Ontarians leaving Canada. Key features: (1) Report income from January 1 to departure date as a resident; (2) Report departure-day deemed disposition capital gains; (3) Calculate Ontario provincial tax on resident-period income; (4) Complete Schedule 3 (Capital Gains/Losses) for deemed disposition; (5) Consider Section 216 elections for future Canadian rental income. Filing deadline: April 30 of the year following departure (or June 15 if you were self-employed). Notification to CRA: attach a letter to your departure return specifying your departure date and new country of residence. CRA Form T1161 (List of Properties by an Emigrant of Canada): required if your property subject to deemed disposition exceeds $25,000 — list all property, FMV, and ACB. Non-compliance penalty: $25/day up to $2,500. T1244 (Election to Defer Payment of Capital Gains): allows deferral of departure tax by providing security to CRA — useful if you have large illiquid assets (private company shares, real estate in a foreign country) triggering deemed disposition without cash to pay the tax.

Introduction

Ontario is Canada's most populous province and a major origin point for Canadians moving abroad — to the United States, the UK, Australia, Europe, and the UAE. The tax implications of leaving Ontario and Canada require careful planning: the CRA's deemed disposition rules can trigger significant capital gains on investment portfolios and business interests even before you've sold anything. The departure year T1 is typically the most complex Canadian return you will file, combining partial-year provincial income with departure-day capital gains calculations. This guide covers the key steps for Ontarians leaving Canada permanently or for an extended period.

Section 01

Interprovincial vs International Departure: Key Differences

Moving from Ontario to another Canadian province is different from moving internationally:

Interprovincial move (within Canada): No deemed disposition. No departure return. Provincial income tax shifts to your new province as of December 31 — pay the new province's tax for the full year if you are resident there on December 31. No change to RRSP, TFSA, or RESP treatment. No non-resident withholding on investments. OHIP ends; new province's health coverage begins (there may be a 3-month waiting period in some provinces, though interprovincial transfers are often faster).

International departure: Full deemed disposition on worldwide assets on departure date. Departure return required. Non-resident withholding applies to future Canadian income. RRSP withdrawals subject to withholding. TFSA accumulation stops. Canadian rental income requires CRA non-resident rental filing (Section 216). This guide focuses on international departure — moving from Ontario to another country permanently or for a significant period.

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FAQ

Frequently Asked Questions

Do I owe Ontario tax on my investment gains if I sell before leaving?

Yes — if you sell investments while still an Ontario tax resident, any capital gains are reported on your Ontario return in the year of sale. Ontario taxes capital gains at your marginal rate on the inclusion amount (50% of the gain included in income). If you are planning to leave Ontario soon, you face a timing decision: sell before departure (pay Ontario capital gains now, avoid deemed disposition on those assets) or sell after departure as a non-resident (25% Canadian non-resident withholding on capital gains from taxable Canadian property; potentially less tax on non-Canadian assets depending on your new country). For most investment portfolios: a deemed disposition before departure creates the same tax event as actually selling — the timing choice matters only for liquidity and destination-country tax consequences.

What happens to my Ontario Employer Health Tax (EHT) obligations when I leave?

Employer Health Tax (EHT) is paid by Ontario employers on payroll — it is an employer obligation, not an employee tax. As an employee leaving Ontario, your employer is responsible for EHT on your Ontario earnings through your last day of work in Ontario. EHT is automatically handled by Ontario payroll — you do not file or pay it personally. If you are self-employed in Ontario (subject to EHT as an employer): notify the Ontario Ministry of Finance of your cessation of Ontario business activity. EHT final return required for the year of departure (covering January 1 to departure date). There are no personal EHT obligations after you cease Ontario employment or business activity.

I have a rental property in Toronto — what are my obligations after I move abroad?

Non-resident landlords with Canadian rental property must comply with CRA Section 216 non-resident rental rules. Your tenant (or property manager) is technically required to withhold 25% of gross rent and remit to CRA. In practice, you should register as a non-resident landlord with CRA and file a Section 216 return (T1159) annually — reporting gross rents and net rental income. Under the Section 216 election, you pay tax on net rental income (after expenses) at graduated Canadian rates, which is almost always better than the 25% gross withholding. Ontario property tax and land transfer tax: continue to apply as property owner regardless of non-residency. When you eventually sell the Toronto property: file a Section 116 certificate with CRA; purchaser withholds 25% of sale price as security; you file a CRA non-resident disposal return and receive a refund of the difference between withholding and actual capital gains tax.

Disclaimer:This guide provides general tax information for educational purposes only. CRA departure tax rules, deemed disposition calculations, and provincial tax rates change with federal and Ontario budgets. Capital gains inclusion rate changes are subject to ongoing legislative review. Nothing in this guide constitutes tax or legal advice. Consult a Canadian CPA before departing Canada.

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