People leave Canada for all kinds of reasons. A job offer in another country, a remote role you can do from anywhere, or even a few years of travel that turns into a new home base.

Whatever the reason, most people plan the move and assume the tax side takes care of itself. Then they learn the harsh truth: Canada has an exit tax.

Its formal name is departure tax. When you stop being a Canadian tax resident, the CRA treats you as having sold certain things you own, at what they’re worth that day. That is called a deemed disposition. You owe tax on the gain even though nothing was sold and no cash came in.

Your job title doesn’t decide whether it applies to you. Executives, business owners and employees can all be caught. What decides it is what you own. A private company, a non-registered investment account, crypto, or property outside Canada can all trigger it. A paycheque and a chequing account on their own will not.

This page covers what gets taxed, when it happens, and how to reduce it. Most of the useful planning happens before you leave, so the earlier you read it, the more of it you can use.

Departure Tax (The Short Version)

If you read nothing else, read this.

What it is. Departure tax (or exit tax) is a deemed sale of certain property on the day you stop being a Canadian tax resident. A deemed sale, which the CRA calls a deemed disposition, means the tax rules treat you as if you sold an asset at fair market value when you didn’t. No money actually traded, but you owe tax on the growth in value since you acquired it.

It does not touch everything, though. Your Canadian home is out. So are your RRSP, TFSA, RESP and other registered accounts, and assets used in a Canadian business you keep running here. Exempt now does not mean tax-free forever. You may still owe Canadian tax when you sell the home or take money out of a registered account. Continuing to own these assets might complicate things in your new jurisdiction as well.

When it applies. Timing departure tax is usually the thing most people get wrong. It applies on the day you stop being a Canadian tax resident, which is often later than the day you fly. The CRA looks at your ties to Canada as a whole: your home, your spouse or partner, your dependants, and smaller ties like bank accounts, health coverage and a driver’s licence. The date usually ends up on the latest of three: when you leave, when your spouse and dependants leave, and when you become resident somewhere else. The full set of facts can push it later or pull it earlier.

How to reduce it. Most of the ways to pay less expire on your residency date. Setting that date deliberately, fixing the cost base of your shares, and reorganising your company all work best before you go. A few reliefs exist afterward, but they are narrower and slower. There are usually lots of options as long as you plan ahead.

You can also delay the payment. Elect to postpone the tax until you sell for real, and the CRA charges no interest while you wait. If the federal tax is over $16,500, you post security. The election is due 30 April of the year after you leave.

What This Page Covers

• What departure tax is. A deemed sale of what you own, and how the gain gets worked out.
• The date that triggers it. Set by your ties to Canada as a whole, and often later than your flight.
• What is exempt, and what is caught. The exclusion list is long enough to change the answer before you do anything.
• How to reduce the bill. Seven levers, almost all of which expire on your residency date.
• How to defer the bill. One form, no interest, and security only on the part above $16,500.
• Alternative minimum tax. The rule that can turn a timing cost into a permanent one, and the reason a large gain needs modelling.
• What your return looks like. The year splits in two, credits get prorated, and couples file separately.
• Forms and deadlines. Two you must file, three you may, and two different due dates.
• Traps and questions. The seven that cause reassessments, the family trust, and the ones clients ask most.

What Departure Tax Is

Some people call it Canada’s exit tax, and the CRA calls it something drier. When you cease to be a Canadian resident you trigger a deemed disposition. Certain property you own is treated as sold at fair market value, and treated as bought back immediately afterwards at that same value.

The gain between your cost and that value goes on your departure return.

The deemed sale happens a moment before your residency ends, not after. That is the whole point. The gain arises while you are still a Canadian resident, so it goes on a Canadian return at Canadian rates. Leaving first does not move it.

When you leave Canada, most, but not all, of your property falls into this tax. We’ll explore the exemptions shortly. People are surprised to learn their hard-earned savings might be subject to tax. For example, non-registered investments, foreign property and shares in privately held corporations are all subject to the tax.

Go back to the company you started with $100 of share capital eleven years ago. That $100 is your cost. Subtract it from today’s valuation and the gain is close to the entire value of the company.

This is where founders get the number wrong. Your cost is the adjusted cost base of your shares, which is the tax record of what you paid for them. It is not the total you have put into the business over eleven years. For most founders, the starting value of their shares is $100.

The Date That Triggers Departure Tax

Ask most people when departure tax hits and they’ll say the day the flight leaves. It keys off the day you stop being a tax resident of Canada, and those can be different days, sometimes months apart.

This is the first thing to settle on any departure file, because getting it wrong changes every valuation on the return.

1. Significant Ties Carry More Weight Than Secondary Ones

So what decides it? Not your passport, and not where your mail goes. Canadian tax residency turns on your residential ties to Canada, and the CRA’s Income Tax Folio S5-F1-C1 sets out the rules. They’re split into two broad categories: primary and secondary.

Primary ties carry a lot more weight. There are three:

1. Your primary dwelling place,
2. your spouse or common-law partner, and
3. your dependants.

Secondary ties count in combination rather than alone, and this is where most of the work on a residency question sits. The folio’s list runs long, including:

1. Personal
2. Social, and
3. Economic

Those categories include ties such as your job, bank accounts, rental properties, shares in private companies, provincial health coverage, a driver’s licence, a registered vehicle, a seasonal dwelling, a Canadian passport and professional memberships.

The trick in determining residency is understanding the ordering of the rules and the cumulative impact of each tie. Practically speaking, it’s normal to have a few remaining ties when people separate from Canada. A classic example might be a bank account or Canadian pension income.

There is also the older common-law idea the folio still uses: you are ordinarily resident where, “in the settled routine of his life”, you “regularly, normally or customarily” live. Intending to come back does not by itself keep you resident, but a settled routine that still runs through Canada might.

2. The Date Is Usually The Latest Of Three

The CRA’s position is that you become a non-resident on the date you sever your residential ties. That usually coincides with the latest of three dates:

1. The date you leave Canada
2. The date your spouse or common-law partner and dependants leave
3. The date you become a resident of the country you’re moving to

Those dates are a marker for when your ties are cut. The test itself is the ties, weighed together. A home you keep available in Canada can hold your residency past all three dates. A treaty tie-breaker, covered below, can end it sooner.

Say you fly in March and your family follows in July, when the school year ends. Your residency changes in July, and every asset gets valued at its July figure.

In a rising market that difference is the whole planning question. In a falling one it works the other way.

3. Form NR73 Is Optional, And Filing It Has A Cost

Form NR73 asks the CRA to give an opinion on your residency status. Filing it is voluntary.

The folio is clear: the opinion “is not binding on the CRA and may be subject to a more detailed review at a later date.” So you’ve volunteered a full account of your ties, and the answer you get back binds nobody. It is a hard trade to recommend.

Where the facts are clean it can be reassuring. Where they’re marginal, you’ve handed the CRA a file it would otherwise have had to go looking for. On marginal facts it is usually better left unfiled.

One more layer to add: a tax treaty may treat you as resident in the other country under its tie-breaker rules. Where it does, subsection 250(5) deems you a non-resident of Canada, even where the domestic ties test would’ve kept you here.

What Is Exempt From Departure Tax

The CRA’s page says you are deemed to have disposed of certain property. That one word is more important than anything else on the page.

The rule reaches some of what you own and leaves the rest alone. People routinely arrive at a figure that frightens them before checking which side each asset falls on.

Federal, and written for an individual leaving Canada. Sources: Canada Revenue Agency, dispositions of property for emigrants, current to 20 January 2026, and the excluded rights and interests defined in subsection 128.1(10) of the Income Tax Act.

The columns are two lists rather than matched pairs, so read down each one. Neither column is the whole list. The statutory definition of an excluded right or interest runs to twelve paragraphs.

Check your own holdings against the legislation before you estimate anything. In practice this single step is what brings the number down, more often than any planning move that follows it.

1. Your Canadian House Is Not Caught

Your Canadian home sits outside the deemed disposition. Nothing surprises a departing client more.

Tax on it, if there’s any, arrives on a real sale. For the years the home qualified as your principal residence there may be no taxable gain at all; years of non-residence fall outside that exemption.

The mechanics do change. A non-resident vendor has to notify the CRA within ten days of the sale. Without a certificate of compliance, the purchaser is entitled to withhold 25% of the gross proceeds. That is withholding on the whole price rather than on the gain, and getting the excess back means filing for it.

Renting it out instead has its own regime, with withholding on gross rent and an election to be taxed on the net figure. Both are their own conversation, and neither is departure tax.

2. The 60-Month Test Looks Back A Decade, Not This Stay

There is a break for people who came to Canada for a stretch and are now leaving again. If you were a resident for 60 months or less in the 10 years before you go, the property you owned when you arrived is not caught. It leaves with you, untaxed.

Sixty months is five years. The count is cumulative, not consecutive, and it covers the whole 10-year window. The length of the stay you happen to be on now is beside the point.

So four years this time, plus three years earlier in the same decade, is 84 months. You are over, and the break does not apply. That arithmetic often lands on people who were certain they qualified, and it is never welcome. If you do come in under, the break covers what you brought with you and what you inherited here, but not what you bought after you arrived.

3. You Can Elect To Pull Excluded Property In

The Act calls it an elective disposition. Under paragraph 128.1(4)(d) an individual can pull property in the first two excluded categories back into the deemed disposition, at fair market value, on the way out. The election is made on Form T2061A. It reaches no further: registered accounts and the short-term-resident category stay outside.

Why would anyone volunteer for a bill? Two reasons. The election steps the cost base up. And it lets you spend something that’s about to expire: an unused capital loss, a remaining lifetime capital gains exemption, a year in which your other income is unusually low.

It’s a real planning lever, and it is only available before you go.

4. Losses Count Too

A deemed disposition runs in both directions, which is a hugely under-used fact. Where a holding is under water, the deemed sale realises the loss. The superficial-loss rule would normally deny a loss on property you reacquire straight away, and it doesn’t reach the emigration case.

There is a second piece of relief further out. Say a holding of taxable Canadian property was deemed disposed of at a gain on departure, and you later sell it for real at a loss. Under subsection 128.1(8) an election can carry that loss back against the departure-year gain.

So a departure tax bill computed at the top of a market isn’t necessarily final.

How To Reduce Your Departure Tax Bill

Deferral changes when you pay, but it doesn’t change how much.

Paying less is a different question. And most of the ways to pay less stop working the day your residency changes.

Here’s the order to check them in.

Set the date deliberately. The residency date follows the facts, and the facts include when your family moves and when you establish residency abroad. A few months of sequencing can do more than everything else on this list.

Fix the adjusted cost base before you leave. Shareholder loans, prior crystallisations and paid-up capital adjustments all change your cost. All three are far easier to document while the company is still a Canadian resident’s company.

Use the lifetime capital gains exemption if the shares qualify. For a qualifying small business corporation this is the largest single number available in a departure year.

There is also a residency rule that you might’ve heard of. The CRA’s guide says you must be resident throughout the year, but subsection 110.6(5) deems you resident throughout it anyway, provided you were resident at some point in the year, and for the whole of either the year before or the year after. Someone leaving after years in Canada satisfies that on the preceding year. Someone who arrived partway through the year before satisfies neither, which is the same short-term resident the 60-month test is written for.

Realise losses into the same year. The deemed disposition and any real sales are reported on the same departure-year return, so a loss position taken deliberately can offset the deemed gain.

Line the two countries up. Where the destination is the United States, the treaty election asks the other side to start counting from the value Canada just taxed.

Look at the corporate structure while it’s still simple. A freeze, a reorganisation or a distribution has a different cost before the residency date than after it. A freeze here means locking today’s value into fixed shares, so future growth accrues to someone else.

None of this is exotic. It’s ordinary planning, and it works best in advance. Three reliefs can reach back afterwards: a later sale at a loss, a return to Canada, and the treaty election. None of them substitute for getting the date right.

How To Defer Your Departure Tax Bill

So what do you do about the cash you haven’t got? There’s an answer, and it’s the part of this that clients are most relieved to hear.

You can elect to defer paying the tax on the deemed disposition until you sell the property for real, and you can do it whatever the amount. You pay later, and you pay without interest.

The deemed disposition is calculated on Form T1243. The election to defer is a separate form, T1244, due by 30 April of the year after you leave, under subsection 220(4.5).

1. Above $16,500 Of Federal Tax, You Post Security

If the federal tax on your deemed disposition comes to more than $16,500, you have to give the CRA adequate security before it will let you wait. Former residents of Quebec cross at $13,777.50, because the Quebec abatement lowers their federal share.

In gains, $16,500 is roughly your first $100,000. Half a capital gain is taxable. At the top federal rate of 33%, tax on $50,000 is $16,500.

One number covers everything you own. That’s the part people typically miss. The CRA totals the tax on every deemed disposition, then compares the total to $16,500. Two properties with $60,000 of gain each clear the line together, but neither clears it by themselves.

Treat $100,000 as a minimum, not a rule. The 33% federal rate only kicks in above roughly $250,000 of taxable income. Below that, it takes a bigger gain to produce the same $16,500.

The million-dollar company above produces roughly $165,000 of federal tax. Ten times the threshold, and that owner isn’t skipping the security question.

One note on the rate. The increase from one-half to two-thirds announced in June 2024 was cancelled. Any arithmetic you read built on two-thirds predates the answer.

2. Your Province Adds To The Bill, Though Not To The Threshold

The $16,500 threshold is measured on federal tax alone, and that part is the same wherever in Canada you left from. Your province then taxes the same taxable half again, at its own rate.

Take Alberta as an example. The top provincial rate is 15%, against the federal 33%:

Illustrative, federal plus Alberta only. Assumes the whole taxable half is taxed at the top rate in both systems, which overstates it for most people, and ignores credits. Rates from the CRA’s 2026 tables, current to 25 June 2026.

Leave from British Columbia and the provincial rate is higher again. The CRA also says you “may also be required to provide security to cover any applicable provincial or territorial tax payable.” So $16,500 decides whether the federal piece needs securing, and caps nothing beyond that.

3. You Only Post Security Above The Floor

The CRA’s summary makes it sound like your whole bill needs securing. It says security must “cover the amount.” The Act is narrower, and the difference is worth money.

Subsection 220(4.51) deems the Minister to have already accepted security for part of what you owe. The amount: whatever tax a Canadian-resident trust would pay on $50,000 of income. At the highest individual percentage, that comes to $16,500 exactly.

So $16,500 isn’t only the line where security starts. It’s a slice already covered. You furnish security for what’s above it and nothing more.

Illustrative. Federal only, at the top 2026 federal rate of 33% and the enacted one-half inclusion rate. Provincial tax, bracket effects and credits ignored.

The floor stays put while the bill grows. At the threshold itself you furnish nothing at all.

What the CRA will accept is its own question, and it is best settled with them directly. Posting security is straightforward if your wealth is liquid. It’s a real constraint if your wealth is the company, the same owner who needed the deferral in the first place. There is no neat answer to that, and anyone offering one hasn’t priced the collateral.

4. What Ends The Deferral

The protected amount gets recalculated every year. The question each time is, “What would you owe if the only property deemed sold were the property you still hold?”

Sell something for real and it drops out of that calculation. The tax attached to it comes due, and everything you still hold stays deferred. So the deferral doesn’t end on a date. It shrinks, one asset at a time.

Selling is not the only exit. Subsection 70(5) deems you to have disposed of each capital property at fair market value immediately before death. That is a disposition, so property still sitting under the deferral when the owner dies drops out of the protected amount then, and the tax it was carrying falls due. If the deferral is doing work in your estate plan, that is the assumption to check first.

Alternative Minimum Tax Can Make This Permanent

Regular tax counts half your capital gain. AMT counts all of it. Section 127.52 sets the fraction at 1/1.

A deemed disposition big enough to worry about is exactly the income AMT was built to catch.

Normally that’s a timing cost. Section 120.2 turns the extra tax into a credit you can apply against regular tax for seven years.

But here’s the part not many people know about. The credit only works against Canadian tax. Leave, owe Canada nothing for seven years, and you have nothing to apply it to. A tax built to be temporary becomes permanent.

What Your Departure-Year Return Looks Like

The departure year splits in two, and the return has to show the split.

Up to your residency date you are taxed the way you always were, on your worldwide income. After it, Canada reaches only Canadian-source income. Section 114 sets out that split, and the deemed disposition sits on the resident side of it, because the Act places that sale a moment before your residency ends.

Your personal credits get prorated. Under section 118.91, most of them are cut back to the part of the year you were resident. The credits that shelter a normal year shelter less of this one.

The province is the one you left from. Not the one you were sitting in on 31 December. The CRA’s instruction is to “use the income tax package for the province or territory where you resided on the date you left Canada.” Leave Alberta in March and you file an Alberta return, wherever you spend the rest of the year.

And couples file separately. Canada has no joint return. Each of you has your own deemed disposition, on your own property, needing your own valuation. A married owner reading this page tends to picture one bill, and it is two. Jointly held property gets split across the two returns.

Forms And Deadlines

Federal, and written for an individual leaving Canada. Sources: Canada Revenue Agency, dispositions of property for emigrants, current to 20 January 2026, and the 30 April date from subsection 220(4.5).

The two required rows are filings; the three elective ones are decisions, and nobody makes a decision for you. If you miss one thing on this page, don’t let it be the deferral election because that’s the one with a hard date.

The filing deadline is 30 April, extended to 15 June if you or your spouse carried on a business. The payment deadline stays 30 April either way.

7 Common Departure Tax Traps

Reassessments almost always arrive about something the client had already thought about, and got wrong by one degree. Not carelessness. People usually come to a reasonable conclusion… that just happened to be wrong.

Here are the common ones.

1. Treating the flight as the residency date. The date is the latest of three, and the family’s move governs more often than people expect.
2. Leaving a residential tie in place that you thought was minor. A house kept available for your own use, or a spouse who stays behind for a year, weighs more than a stack of secondary ties.
3. The NR73 nobody asked you to file. It is optional, the answer binds nobody, and it hands over a full account of your ties.
4. Assuming the registered accounts are settled. They are outside the deemed disposition, which is the Canadian half of the question. The country you move to is under no obligation to respect the shelter.
5. Forgetting the Home Buyers’ Plan. An outstanding balance has to be repaid by the date you file for the year you become a non-resident, or 60 days after you become one, whichever comes first. Miss both and the balance goes into income.
6. Assuming the deferral is automatic. It is an election, on a form, by 30 April of the following year.
7. Reading a tax treaty online and taking it at face value. Treaty articles interact with domestic law and with each other, and the tie-breaker rules in particular are not self-executing.

All of them are far cheaper to find early than after the CRA does.

Departure Tax Frequently Asked Questions (FAQs)

I Left And Never Filed Any Of This. Now What?

If everything you owned when you left came to more than $25,000, you were meant to list the reportable part of it on Form T1161, which is more people than you’d think. The late penalty is $25 a day, capped at $2,500, which makes it a poor reason to leave a bigger problem alone. People do exactly that.

The CRA runs a Voluntary Disclosures Program for the bigger problem: come forward before they come to you, and you get protection from prosecution and relief from penalties and some interest. Check the date on anything you read about it. The program was rewritten for applications received on or after 1 October 2025, and the new version is more forgiving. The relief narrows once the CRA contacts you, so waiting is the one move with no upside.

What Happens To My TFSA And My RRSP?

Good news first. Your TFSA comes with you. You keep the account, and you keep the exemption from Canadian tax on the income and withdrawals inside it. What stops is new room. Your contribution room stops growing while you’re away.

Contributions themselves need care, because the rule is not what most people think. You can physically pay into a TFSA as a non-resident. The CRA then charges 1% of that contribution for every month it sits there, until you take it out or become a resident again. So it isn’t blocked. It’s expensive, and an accidental transfer is the common version of this.

That’s the Canadian half, and it’s the smaller half. The shelter is a Canadian one, and the country you move to is under no obligation to recognise it. If you’re heading to the United States, the TFSA is the account most likely to be treated differently there, and the treaty does less for it than people assume. RRSPs and RRIFs work differently again. Settle both before you move anything.

What Happens To My Investment Accounts?

A non-registered portfolio is caught by the deemed disposition, so the tax side is the main subject of this page. The practical question is separate, and it arrives at a bad moment: ask your brokerage, in writing and before you go, what it does with an account whose owner becomes a non-resident. Firms differ, and some restrict what a non-resident account can do. It’s a cheap question to ask now and an expensive one to discover later.

What If I Move Back To Canada Later?

If you left after 1 October 1996 and later become a Canadian resident again, you can elect to adjust the deemed disposition you reported on the way out. You need to still own some or all of the property; where you do, you can reduce the gain you reported for your departure year, up to the amount you reported.

The election is a written request, due on or before your filing due date for the year you re-establish residency. People write the money off, believing that door had closed.

What If The Other Country Taxes The Same Gain Again?

Here’s the trap most worth seeing coming. Canada taxes the gain on the way out, at the value on your departure date. Years later you sell for real, and the United States works out its own gain from its own cost base, which is what you originally paid. The same growth gets taxed twice.

The treaty has an answer. Where one country treats you as having alienated property and taxes you on it, you may elect to be treated in the other country as if you had sold and repurchased at fair market value immediately beforehand, under Article XIII(7) of the Canada-US treaty. In plain terms, it asks the United States to start counting from the number Canada just taxed you on.

Does My Company Become American If I Run It From Texas?

No. A corporation incorporated in Canada after 26 April 1965 is deemed resident in Canada, and it stays that way wherever its owner goes. Run your Calgary company from a kitchen table in Texas and you haven’t moved it out of Canada. It may, though, stop counting as controlled by a Canadian. That can cost it its status as a Canadian-controlled private corporation (CCPC), and that’s a big deal.

In addition, what you may have done is give another country’s tax authority something to look at. Whether that creates a filing obligation there is answered under that country’s law and the treaty, and it’s the first thing to check before you go.

A company can cease to be Canadian resident if central management genuinely moves, and that regime is considerably harsher, with none of the exclusions an individual gets and a further 25% tax under section 219.1. If that’s on the table, it’s a conversation to have before anyone moves, not after.

What If A Family Trust Holds The Shares?

For an owner-managed structure this is usually the biggest thing left off a page like this.

A trust is not a bystander. Subsection 104(2) deems a trust to be an individual in respect of the trust property, so the deemed-disposition rule can reach the trust in its own right. A trust’s residence follows where it is actually managed and controlled, which in practice means the trustees, so trustees who move abroad can push a trust offside without anyone intending it.

That produces a second deemed disposition, on the trust’s property, separate from yours. And the short-term-resident relief in the exclusion table above is expressly unavailable to a trust.

If opco, holdco and a family trust are stacked, the structure wants looking at as a whole before anyone’s residency changes. That is a conversation to have first, not afterwards.

Speak with a cross-border advisor

Who Needs Cross-Border Tax Advice?

Maxim’s cross-border work falls into three groups:

• Departing residents. Leaving Canada and facing departure tax.
• New arrivals. Structuring things before you become a Canadian tax resident.
• Split-year families. Two countries, two filing obligations, and a household in between.

If you own a business, a move brings corporate consequences stacked on top of the personal ones. Maxim handles both together, because in practice they don’t come apart.

Valuations For Your Departure Tax Return

A deemed sale needs a value, and the CRA is entitled to take a different view of it than you do. This is the part of a departure file that deserves the most attention, because it’s the one number you supplied yourself.

Maxim builds valuations meant to hold up under that scrutiny. The work is scoped separately, and it is only worth paying for when the tax at stake justifies the cost.

What Cross-Border Tax Advice Costs

Depending on how many countries are involved and how much modelling the situation needs, engagements generally run 10 to 60 hours, which works out between $5,000 and $30,000.

You’ll have a precise estimate after the first consultation, well before you commit to anything. And where the tax at stake doesn’t justify the work required, you’ll be told that instead.

You Have Enough To Manage Before You Leave Canada

Wherever you are in the timeline, the file can be picked up from there. You’ll leave the first consultation knowing which tax issues are real for you, and what it costs to deal with them.

If you take one thing from this page, make it this: timing is the lever that stops working the day your residency changes. And the deferral election is due by 30 April of the year after.

Book a paid advisory consultation

The post Departure Tax In Canada: What Is Taxed, When, And How To Reduce It appeared first on Maxim.

You can stop being a Canadian tax resident and still owe Canada money.

For example, let’s say you move abroad but keep the rental condo, your shares in the company you helped start, or a loan you made to a business back home. Canada still taxes that income. This is called non-resident tax and it applies to any Canadian-source income you receive after you’ve left, no matter how small.

Each spring, an NR4 slip arrives for every payment you got the year before. It shows the amount, the tax already withheld, and a code for what kind of income it was. What it doesn’t tell you is whether that withholding was correct or not. That’s a big miss… and something we need to catch.

It’s very common for people to have continuing interests when they leave Canada. For example, this year you had three kinds of income: rent from the condo, a dividend from the company, and interest on a loan. Each one gets taxed by a different rule, and each one can go wrong in its own way.

In the end, you might have three payments, and three different answers on how they’re taxed.

Non-Resident Tax In a Nutshell

Canada keeps taxing you on Canadian income, whether or not you’re still here. That includes the rent, the dividend, and the interest from our example, plus pensions, royalties, and any pay for work you still do in Canada.

Here’s the part that trips people up. Canada collects this tax in two completely different ways, and which one applies depends on the type of income, not how much you earned.

The first method… your payer takes a cut before you see the money. This is how rent, dividends, pensions, and royalties work. Whoever pays you withholds 25% and sends it straight to the CRA. You don’t file anything. You just get 75% of the amount, minus whatever the treaty changes (more on that below).

The second… you file a return, like you did when you lived here. This is how work income, business income, and profit from selling Canadian property work. Graduated rates, deductions, the whole normal process.

Our three examples all fall under the first method, the automatic 25% cut. But 25% isn’t always the final answer:

• Rent: the 25% doesn’t move, but it’s charged on your full rent collected, not what’s left after expenses. A section 216 election lets you pay tax on the smaller number instead. It usually saves you money.
• Dividends: the US-Canada treaty caps this at 15%. If your bank withheld the full 25%, you overpaid by 10 points.
• Interest: on a normal loan to someone with no other tie to you, the treaty usually drops this to 0%. If anything was withheld, it shouldn’t have been.

Also, filing a tax return to fix these issues isn’t free. You lose most personal tax credits, and a 48% federal surtax replaces the provincial tax you’d normally pay. For rent, it’s still almost always worth it. For pensions, often not.

And the deadlines are strict. Miss the window for your section 216 return on rental income and you don’t get a late option, you lose the election entirely. It sounds tricky but it’s not. We see a lot of people shy away from holding Canadian assets as non-residents…or worse, delay their departure plans. If you do your homework and have a great team, this stuff becomes manageable.

Let’s dive in deeper.

On This Page

• Non-Resident Status Comes First
• The Two Systems Canada Taxes Non-Residents Under
• Withholding Tax On Interest, Dividends And Royalties
• Part XIII Or Part I: Sorting Every Canadian Payment You Receive
• Section 216: Moving Rent From Gross To Net
• What A Return Costs You: The Surtax And The 90% Rule
• Section 217: The Election That Might Not Help You
• When You Have To File, And What You Need To Do It
• 8 Common Non-Resident Tax Traps
• Non-Resident Tax Canada Frequently Asked Questions (FAQs)
• Start With A List Of What Canada Pays You

Non-Resident Status Comes First

Everything above only applies once you’ve actually become a non-resident. That’s not about your passport, and it’s not about where your mail goes.

The CRA looks at your ties to Canada, all together. Three matter almost always:

1. a home here,
2. a spouse or common-law partner, and
3. dependants

Got smaller ties, like a bank account, health coverage, or a driver’s licence? These usually don’t count alone, but add enough of them together and they can. The departure tax page walks through the full test.

Here’s the big trap.

Spend 183 days or more in Canada in a year, and if you don’t have significant ties here and no other country claims you as a tax resident under a treaty, Canada can still tax you as a full-year resident. Not just on what you earned in Canada. On everything, worldwide. It’s called deemed residency, and it’s something to understand before you spend long stretches in Canada.

“183 days” sounds like it’s about where you live, but it isn’t. It’s just a day count, and work days count too. Someone flying to a Canadian job site and going home only once, seven months later, can still hit 183 without ever meaning to live here. Weekends spent in the hotel between shifts count. So does every day you’re simply in the country, whatever you’re doing.

If you’re close to that number, count actual days in Canada. Not workdays, and not trips home you meant to take.

The Two Systems Canada Taxes Non-Residents Under

Every dollar Canada pays you falls under one of two rules. Which rule applies depends only on what kind of income it is, not how much.

Take $60,000 and change nothing but the label:

• As rent from a Canadian property, Canada takes 25% off the top before you see it. Done.
• As a dividend, same thing. 25% off the top. Done.
• As consulting fees for work you did in Canada, you file a return, like you did when you lived here.

Same $60,000, two completely different processes. That split has a name: Part XIII and Part I of the Income Tax Act.

Part XIII: a flat 25% cut, and usually that’s the end of it

The law says a non-resident pays 25% tax on income a Canadian resident pays them. The list of income this covers: rent, royalties, pensions, RRSP and RRIF payments, annuities, management fees, and payouts from an estate or trust.

Your Canadian payer does the work here, not you. They hold back 25%, send it to the CRA, and pay you what’s left. You file nothing, not even a return in April. If 25% was the correct amount, you’re done and nothing more is owed.

Here’s the catch, and it’s the same one from our rent, dividend, and interest example: a correct 25% and a wrong 25% look identical on the slip. There’s nothing on the paper telling you which one you got. That’s why people leave it uninvestigated for years.

The consulting fee trap

Consulting fees paid to a non-resident for work done in Canada get 15% withheld too, and it looks exactly like the Part XIII cut above, but it isn’t.

Regulation 105 requires a Canadian client to withhold 15% from payments for services performed in Canada. But that 15% is a deposit, not a final tax. You still file a return and the 15% already withheld comes off whatever you owe.

Miss that, and you either skip a return you owed, or assume you’re square when you’re not.

Part I: work, business, and selling Canadian property

Three things push you into the return system instead of flat withholding:

1. Working a job in Canada
2. Running a business in Canada
3. Selling “taxable Canadian property”

The law spells out the first two plainly. The third is where people get surprised.

“Taxable Canadian property” isn’t just real estate, though real estate is in it. It also includes:

• Business property in Canada, even with no real estate involved
• Shares, or partnership and trust interests, where more than half the value came from Canadian real estate, resources, or timber at any point in the last 60 months, not just on the day you sold

That five-year look-back catches people who think they’re clear because today’s balance sheet doesn’t look like real estate.

Landing in the Part I system means filing a return with deductions and graduated rates, instead of a flat 25%. On a modest amount, that usually works in your favor. On a large one, it can stop being a benefit at all, for reasons covered under what filing a return costs you.

Selling property has a deadline before any of this even applies

If you’re selling Canadian property, you have to notify the CRA within 10 days of the sale and get a certificate of compliance.

Miss it, and the buyer is required to hold back 25% of the entire sale price, 50% on some property types. Not 25% of your profit. 25% of the total price, before subtracting what you originally paid for it.

If you’re selling Canadian property, start the certificate paperwork before you have a closing date, not after.

Withholding Tax On Interest, Dividends And Royalties

On interest, Canada often withholds tax it never had the right to collect. And the money to get back is usually easy to spot once you know where to look.

Most ordinary loans owe Canada nothing

Canada only taxes interest in two situations: when you and the borrower aren’t at arm’s length (think: you control the company, or you’re related to the owner), or when your interest rate earned moves with the borrower’s profits, no matter who they are.

For almost all other loans and interest income, there’s no withholding and no Canadian tax at all.

Here’s the difference in practice. Say you lend a Canadian company $200,000 at 5%. That’s $10,000 a year in interest.

• If you have no other tie to the company, no shares, no board seat, Canada takes none of it.
• If you control that company, the exact same loan gets taxed. $2,500 comes off before you see a dime.

There’s a second trap: if your interest payment moves with the borrower’s revenue or profit (sometimes called “participating debt interest”), Canada taxes it either way. The arm’s-length test doesn’t save you here.

If you live in the US, there’s a second layer of protection. The treaty says interest earned by a US resident can only be taxed by the US. So on an arm’s-length loan, both the law and the treaty point the same way: Canada shouldn’t be taking anything.

Treaty rates don’t apply automatically

Lower treaty rates exist on dividends and royalties too. But nobody applies them for you.

Here’s the part that surprises people: your payer starts by assuming the full Canadian rate applies. They only use the treaty rate once you’ve told them you qualify, which means filing Form NR301 with them directly.

Skip that step, and you’ll get the full rate withheld correctly, by the letter of the process, even though you were entitled to less. Send Form NR301 to each payer before the next payment goes out. It’s a five-minute form, and it’s cheaper than finding the shortfall on next year’s slip and fighting to get it back.

One more thing: the rates in the table below are Canada-US numbers. Live somewhere else, and the same ideas apply, but the actual percentages won’t match. Check your own country’s treaty before relying on these.

Part XIII Or Part I: Sorting Every Canadian Payment You Receive

Here is every common Canadian income stream, sorted:

Base: Canadian-source income paid to a non-resident individual, for the 2026 tax year. Statutory rates are from sections 115(1), 212(1) and 212(2) of the Income Tax Act, with the carve-outs in 212(4) and the provincial allocation in Regulation 2602. Treaty references are to the Canada–US convention consolidated to include the protocol signed 21 September 2007, and apply only to a resident of the United States. Verified 14 September 2026.

Every treaty ceiling above carries conditions this page does not set out. Articles XI(6), XII(3) and XV(2) in particular each run to a list of carve-outs, and the treaty page works through them.

※ Regulation 2602 counts a non-resident’s employment income attributable to duties performed in a province, and business income earned in a province, as earned in that province. Those carry that province’s own tax and fall outside the 48% surtax. A business carried on in Canada without a permanent establishment in any province stays outside the regulation and does carry it, as does income that is neither employment nor business income.

⌂ A permanent establishment is a fixed place of business in Canada. A customer here is not one, and neither is a contract signed here. If you sell services, watch the rule the 2007 protocol added: it can deem you to have one without any premises at all.

† Section 217 covers a defined list of qualifying income. Check your own income type against Guide T4058 before relying on it.

◊ OAS carries a second, separate charge. The recovery tax reaches non-residents, who file Form T1136, and it stacks on the withholding, capped so that the two together never exceed the OAS received in the year.

◊◊ Management fees are not given their own article in the treaty, and whether they fall under business profits in Article VII turns on facts, and on sources this page leaves unverified. The cell is left unstated rather than guessed.

Section 216: Moving Rent From Gross To Net

If you’re a landlord, 25% withholding has one inherent flaw: it’s charged on your gross rent, not what you actually earned. A property carrying a mortgage, property tax, insurance, and a management fee might barely break even while Canada takes a quarter of every rent check that comes in.

A section 216 election fixes that. It lets you pay tax on your net rental income, or what’s left after expenses, instead of the gross amount collected. It’s a separate return, covering only that rental income. Where withholding took more than you owed, the CRA refunds the difference.

For most rental properties, this isn’t close. Expenses would have to be tiny, and rent enormous, before 25% of gross beats graduated tax on net. If you own a Canadian rental and haven’t filed one of these, there’s likely money owed to you.

Form NR6: Fix The Withholding Before It Happens, Not After

Section 216 gets your money back. Eventually. It does nothing about the year in between, while you wait on a refund for tax that shouldn’t have been taken in the first place.

Form NR6 fixes that upfront. Get it approved before rent starts coming in, and your Canadian agent withholds 25% of your net income all year, not your gross. You never overpay to begin with.

That fix has a cost for your agent, too. Once NR6 is approved, your agent is responsible for remitting that tax to the CRA by the 15th of the month after they pay you. That’s a real obligation you’re handing your property manager. Talk to them before you file the form, not after.

Miss The Deadline, And The Election Is Gone

You generally have two years from the end of the year the rent was paid to file your section 216 return. File under an approved NR6, and that window shrinks to June 30 of the following year.

Miss it, and the CRA doesn’t grant an extension or charge a penalty. It just makes the election invalid.

That puts you back to 25% of gross rent for that year, with no way to fix it after the fact. It happens every year, usually because nobody flagged the date until it had already passed.

Confirm the actual due date for the year you’re filing, since NR6 changes it. Don’t rely on “two years” as the final answer.

What A Return Costs You: The Surtax And The 90% Rule

Filing a return isn’t free. Two costs catch people off guard, and both matter when you’re deciding if an election is worth it.

The 48% surtax replaces provincial tax, and non-residents usually pay it in full

Here’s the assumption people make: “I don’t live in a province, so provincial tax doesn’t apply to me. I only pay the federal rate. I come out ahead.”

That logic sounds airtight, but it’s wrong because of one rule: the federal surtax.

Every Canadian resident pays provincial tax on top of federal tax. Non-residents don’t live in a province, so instead they pay a federal surtax that stands in for it. That surtax is 48% of your federal tax, and how much of it applies depends on one thing: how much of your income counts as “earned in a province.”

For most non-resident income, none of it does. Rent, a pension, a gain on Canadian real estate, none of that is tied to a specific province. For income like that, the full 48% surtax applies. You don’t skip provincial-level tax. You just pay it under a different name, calculated a different way, usually landing higher than what a resident in a low-tax province would pay.

There’s one real exception: income from a job or business you actively worked in a specific province. That income is treated as “earned in a province,” and gets that province’s tax rate instead of the surtax.

So the assumption “no province, no provincial-style tax” is only true for employment and business income tied to a specific province. On rent, pensions, and property gains, it’s backwards: you almost always pay the surtax in full.

Here is the condo, run both ways. $30,000 of rent, $18,000 of costs:

Illustrative figures for the 2026 tax year, to show the mechanism rather than predict a bill. Rent and expenses are round numbers chosen for the example, and every tax figure is computed from the rates cited on this page. The election column claims no personal credit against the net rent. Whether any is available to you turns on the 90% test below, so treat this as a comparison rather than a quote.

The election wins by about $5,000. The surtax took roughly a third of the smaller bill and came nowhere near reversing the decision. That’s how it goes on rental income, because the expenses are large. Pension income behaves differently: nothing to deduct, and the surtax applies to graduated tax on the whole payment.

The 90% Rule Decides Whether You Keep Your Credits

Filing a Canadian return gets you access to non-refundable credits, the basic personal amount, the age amount, tuition. These come off your tax bill directly, not your income, and on a small Canadian income they can wipe out most of what you owe.

But as a non-resident, you don’t get them automatically. You have to pass a test first.

The test is simple: what share of your total income for the year came from Canada? Work that out on Form T1234, Schedule B. Hit 90% or more, and you keep every credit a resident would get. Fall under that, and most of them disappear.

What survives below 90% is a short, specific list: CPP or QPP contributions, EI premiums, student loan interest, tuition, and the disability amount, all things you actually paid into or qualify for directly.

Here’s the one that stings. The basic personal amount, the credit doing most of the work on a typical return, isn’t on that list. Miss the 90% threshold, and that’s the first thing you lose.

So before filing a return to fix a withholding problem, it’s worth checking where you land on that 90% line. If most of your income last year came from outside Canada, the credits you were counting on to shrink the bill might not be there.

Section 217: The Election That Might Not Help You

The same swap you saw for rent, trading flat withholding for a regular return, exists for pension income too: old age security, CPP, QPP, superannuation, RRSP payments, and a defined list of others. File a Canadian return, and you might get some of the withholding back.

The CRA treats this election with visibly more caution than the rental one. Its own guidance flags “should you elect” as a question worth asking, and describes the outcome as a possible refund of all or part of the tax withheld. Not “you’ll get it back.” Might, and maybe only part.

Here’s why the caution is warranted. Section 216 works for rent because rental properties have real expenses (mortgage interest, repairs, management fees) that shrink your taxable income well below the gross amount Canada withheld on. Pensions don’t have expenses to deduct. There’s nothing to shrink.

So the trade you’re actually making is: a flat 25% (or 15%, if a treaty caps your pension rate), against graduated tax on the full pension amount, plus the surtax, minus whatever credits you still qualify for after the 90% test.

Here’s where that goes wrong. Say your only Canadian income is a modest pension, and most of your actual income comes from where you live now. Your Canadian income is nowhere near 90% of your total. You lose most of your credits. You pay graduated rates. You pay the surtax. And you have almost nothing left to offset any of it.

There’s no shortcut here. No rule of thumb tells you in advance whether section 217 helps or hurts. The only way to know is to run the numbers both ways, and since income changes, you’d need to check again every year. That’s real work, and it’s worth knowing that going in, before you file, not after.

When You Have To File, And What You Need To Do It

Getting the rate right is only half the job. The other half is paperwork, and it’s where people trip up after they’ve done everything else correctly.

Some things force a return, whether you want one or not. The elections in this guide (section 216, section 217) are optional. Filing isn’t always. If you sold Canadian property this year, or earned employment or business income in Canada, you have to file a return. Owing zero doesn’t excuse you. Selling the condo puts you in the filing system automatically.

Every deadline on this page is different:

• 10 days to notify the CRA after selling Canadian property
• 2 years to file a section 216 return, or June 30 of the following year if an NR6 was approved
• The 15th of the month for your agent to remit withheld tax
• April 30 for a standard return, or June 15 if you carried on a business

None of these line up. That’s why people who track everything else correctly still miss one.

You can’t file anything without a tax number, and it takes weeks to get one. No Canadian social insurance number means no tax number, and no tax number means you can’t file a return, make an election, reduce withholding, or report a property sale. You need Form T1261 to get one, and the CRA’s own estimate is 6 to 8 weeks.

That timeline ruins more deadlines than anything else here. If your section 216 return is due June 30 and you start the tax number process in May, you’re already too late.

Over-withheld tax is refundable, but only for two years. Say a payer withheld 25% when the treaty capped it at 15%. You can claim that difference back on Form NR7-R. The catch: the CRA has to receive it within two years of the end of the year the tax was sent in. Miss the window, and the money is gone for good.

That means 2026 over-withholding has to be claimed by the end of 2028. Anything from 2023 is already unrecoverable.

If any of this sounds like you, do this first: Pull your last two years of NR4 slips. Check the withholding rate against what you actually owed. The oldest ones on that list are the ones closest to expiring, so start there.

8 Common Non-Resident Tax Traps

These come up over and over. Avoid these mistakes:

1. Assuming all your income is taxed the same way. It isn’t. Canada sorts what you earn by type. Pay for work done here goes on a tax return at regular rates. Rent, pensions, and dividends lose a flat 25% off the top, often less under a treaty. Most interest from a bank isn’t taxed at all. Each type has its own rules, so check each one.
2. Assuming interest is taxed at 25%. It usually isn’t. Ordinary interest from an unrelated borrower isn’t taxed by Canada at all, and for a US resident the treaty points the same way.
3. Treating 183 days as a safe number. Reach it on a long stay, with no significant ties here and no other country claiming you under a treaty, and Canada can tax you as a resident for the whole year, on worldwide income.
4. Missing the section 216 deadline. The CRA treats an out-of-time election as invalid, which puts 25% of the gross back as your final Canadian tax for that year.
5. Starting the tax number too late. An ITN takes six to eight weeks, and it sits in front of every return and every waiver application on this page.
6. Assuming no province means no provincial tax. Instead you pay an extra 48% on top of your federal tax, on income not earned in a province, which is most of what a non-resident receives.
7. Waiting on a refund that expires. Form NR7-R has to reach the CRA within two years of the end of the calendar year the tax was sent. After that the money is gone.
8. Expecting the treaty rate to apply itself. Your payer starts from the rate in the Act. You only get the lower treaty rate once you’ve given them Form NR301.

Non-Resident Tax Canada Frequently Asked Questions (FAQs)

What is non-resident tax in Canada?

Non-resident tax is the tax Canada charges on Canadian income you receive after you stop being a Canadian tax resident. It covers rent, dividends, pensions, RRSP and RRIF withdrawals, and royalties. It also covers pay for work done in Canada, business income earned here, and gains when you sell Canadian property. Most of it is taken off before you’re paid.

How much tax does Canada withhold from non-residents?

The standard rate is 25% of the gross payment, under Part XIII of the Income Tax Act. A tax treaty can lower it. For US residents, dividends usually drop to 15% and most pensions to 15%. Ordinary interest paid to an unrelated person isn’t taxed at all. To get a treaty rate, you give your payer Form NR301 before they pay you.

What is an NR4 slip?

An NR4 slip is the tax slip a Canadian payer sends you each spring for payments made to you as a non-resident. It shows the gross amount, the tax withheld, and a code for the type of income. It doesn’t tell you whether the right rate was withheld. Check each slip against the rate that should apply to that income.

Do non-residents have to file a Canadian tax return?

Not always. If all your Canadian income had the correct tax withheld at source, you usually don’t file. You do have to file if you sold taxable Canadian property, like real estate, or earned income from work or a business in Canada. You may also choose to file to pay less tax on rent under section 216, or to claim a refund.

How is rental income taxed for non-residents of Canada?

By default, your tenant or property manager withholds 25% of the gross rent. You can file a section 216 return instead and pay tax only on your net rental income after expenses, which usually saves money. To lower the monthly withholding during the year, file Form NR6 before the rent is paid. Your agent then withholds 25% of the net rent.

What is the deadline for a section 216 return?

You normally have two years from the end of the year the rent was paid to file your section 216 return. If you filed an approved Form NR6 that year, the deadline is much shorter: 30 June of the following year. Miss it and the election is invalid, so you’re taxed at 25% of the gross rent with no way to fix it.

How do I get back non-resident tax that was over-withheld?

File Form NR7-R to apply for a refund of Part XIII tax that was withheld at too high a rate. The CRA has to receive it within two years of the end of the calendar year the tax was sent to the CRA. After that, the refund is lost, so check your oldest NR4 slips first.

Do I need a Canadian tax number as a non-resident?

If you don’t have a Canadian social insurance number, you need an individual tax number, or ITN, before you can file a return, make a section 216 election, or apply to reduce withholding. You apply on Form T1261. The CRA says to allow 6 to 8 weeks, so apply well before any deadline.

Start With A List Of What Canada Pays You

Three things in this article are all about timing, not tax rate. Your payer sets the withholding rate the moment they pay you, not later. An NR6 only works if it’s approved before rent goes out, not after. And a section 216 election has a hard deadline, past which it simply stops existing.

None of that can be fixed in April, sitting down to file a return. By then, the year’s already happened.

So work backwards from what’s already true. Write down everything Canada pays you, and what kind of income each one is. Match each against what you’ve read here. For each one, ask three questions:

• Is the withholding rate already correct?
• Does fixing it require a form sitting with your payer (like NR301 or NR6)?
• Does it come with an election and a deadline (like section 216)?

If more than one or two items on your list need action, that’s worth bringing to an actual conversation instead of guessing your way through it alone. An hour now costs a lot less than a correction next spring.

Book a paid advisory consultation

The post Non-Resident Tax Canada: What Canada Still Taxes After You Leave appeared first on Maxim.

Plenty of Canadians spend the winter in the US. You might rent in Arizona, own a condo in Florida, or drive down with an RV each November. Most go back and forth for years without thinking about US tax. Personally, I spend about four months a year between Arizona and California. I love the weather and lifestyle.

But here’s the problem. The US has its own test for who counts as a resident for tax purposes. It’s called the substantial presence test, and it counts days, not months. Pass it and the US can tax your worldwide income the same way it taxes an American’s. Form 8840 is the short form that keeps most snowbirds out, by showing the IRS their real home is in Canada.

Snowbird Tax Rules Key Takeaways

What the US counts. It counts days across three years: all of this year’s, a third of last year’s, and a sixth of the year before (more on that below). A total of 183 means you pass the substantial presence test.

How you stay out. File Form 8840, the Closer Connection Exception Statement, for each year you pass the test. It shows your real home is in Canada. It’s due by the Form 1040-NR deadline, extensions included, and each person files their own. File it late and you lose the exception for that year, unless you can show clear and convincing evidence for the delay.

Where it goes wrong. Form 8840 only works if you spent fewer than 183 actual days in the US that year. Above that, the Canada US tax treaty decides where you live. Lose that tie-breaker and Canada treats you as having left, and the CRA taxes you as if you sold things you still own.

On This Page

• How The Substantial Presence Test (Really) Works
• What Four Months A Year Adds Up To
• Why Does 183 Days Show Up Twice?
• How Long Can Canadians Stay In The US?
• Form 8840 And The Closer Connection Exception
• The Canada US Tax Treaty Tie-Breaker At 183 Days
• What This Means For Your Canadian Tax Residency
• 5 Areas This Page Doesn’t Cover
• Snowbird Tax Rules Frequently Asked Questions (FAQs)
• Count Your Last Three Years Before You Book The Next Winter

How The Substantial Presence Test (Really) Works

You’ve probably heard of the substantial presence test. But did you know the IRS test has two parts? You meet it if you were in the US for at least 31 days this year, and at least 183 days across three years: this year and the two before it.

The first part catches almost every snowbird. A four-month winter passes 31 days before Christmas.

If you hold a green card, you can skip this section. You’re already a US tax resident for any year you hold one, whatever your days say.

The second part is where people go wrong. The IRS counts all of this year’s days, a third of last year’s, and a sixth of the year before.

Here’s an example: say you spend 120 days in Arizona every winter, year after year. Here’s how the IRS adds that up for this year’s test:

• This year: 120 days, count all of them → 120
• Last year: 120 days, count a third → 40
• The year before: 120 days, count a sixth → 20

Total: 180. Three days under the 183 that triggers the test.

If your trip is the same length every year, this evens out and the table below works. Change the pattern, with one long stay or one skipped winter, and the numbers shift. One long stay can catch you that year and keep counting against you for the next two. If you’re changing the shape of a winter, check the count before you book, not after.

A Part Day Counts As A Whole Day

Any day you’re in the US, even for an hour, counts as a full day. Arriving in the evening uses a day, and so does leaving in the morning. For a snowbird who crosses twice a winter, that’s two days a year you might not have counted.

The count covers the 50 states and Washington, DC. It doesn’t include US territories or US airspace. A week in Puerto Rico doesn’t count, and neither does a flight that crosses the US without landing.

Some days are left out of the count. Two come up often:

• Transit days. Less than 24 hours in the US on your way between two places outside it, like a connection through Dallas. Leave the airport for a meeting and it counts.
• Medical days. Days you couldn’t leave because of a medical condition that started while you were there. You claim these on Form 8843.

The others cover commuting from Canada or Mexico for work, ship crews, NATO personnel and a few special categories. Publication 519 lists them.

What Four Months A Year Adds Up To

One, plus a third, plus a sixth, adds up to one and a half. So if your trip is the same length every year, the IRS’s three-year total is your trip times 1.5.

Here’s what that looks like for common trip lengths:

Taking a look above, notice that:

Four months is closer than it looks. At 120 days a year, it only takes 123 days in one winter to tip you. That leaves three days, which a delayed flight and a long weekend can use up.

The line falls at 122 days. A steady trip of just over four months a year meets the test.

Form 8840 covers more than people expect. Once you meet the test, the form is available in any year you spend under 183 actual days in the US. A five-month trip is covered, and a six-month trip is covered, just barely.

Why Does 183 Days Show Up Twice?

183 #1, the three-year weighted total. This decides whether the IRS even opens a file on you. Add this year’s days in full, a third of last year’s, a sixth of the year before. Hit 183, and you’re “caught,” and the substantial presence test applies to you.

183 #2, the plain count, this year only. This decides whether Form 8840 can get you back out. No weighting. Just: how many actual days were you in the US this year? Under 183, the form works. At 183 or over, it doesn’t, no matter what the form says.

Here’s why that trips people up: both thresholds are 183, but they’re counting completely different things. You can fail the first one and still pass the second.

What changes the outcome is whether this year alone stayed under 183 real days.

How Long Can Canadians Stay In The US?

As a visitor, usually up to six months at a time. Canadians don’t need a visa for a visit, and the border officer decides how long you can stay each time you enter. Six months is the usual maximum, not a right.

Since 2025, anyone staying 30 days or more also has to be registered with the US government. Flying in usually covers it, because you get an I-94 record at the airport. Crossing by land may not, and then you register online with Form G-325R.

That’s the immigration answer, and an immigration lawyer is the right person for anything beyond it. The tax answer is separate, and it can catch you sooner. The IRS runs its own count, and it doesn’t care what the border officer wrote on your record.

Form 8840 And The Closer Connection Exception

Here’s the good news. If you meet the substantial presence test but your life is clearly still in Canada, you can say so, and the IRS treats you as a non-resident for that year. This is called the closer connection exception.

You claim it on Form 8840 and it only exists once you file it. If you don’t file, you don’t have it.

Most snowbirds don’t file a US return, so you mail Form 8840 on its own to: Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215. It’s due by the Form 1040-NR deadline, extensions included. If you do file a US return, it goes with that.

File it late and you lose the exception for that year, unless you can show clear and convincing evidence that you tried to learn the rules and took real steps to follow them. That’s a high bar.

Two practical points:

• You don’t need a US tax number. The form only asks for one if you have it. Leave the line blank if you don’t.
• Each person files their own. A couple wintering together needs two forms. Plenty of people file one and assume it covers both.

To use the exception, you need all four of these:

• You were in the US less than 183 days that year. That’s the second 183.
• Your tax home was in one foreign country all year. For work, that’s where your main place of business is. If you don’t work, it’s where you normally live. For a retired snowbird, that’s usually Canada.
• You had a closer connection to that country than to the US.
• You had not applied for, or taken steps toward, a green card.

For the closer connection part, the IRS looks at facts about your life, like where your home, family and belongings are. The table further down compares its list with Canada’s. One small tip: keep your Alberta driver’s licence. Swapping it for a state licence because the line was shorter is a bad trade.

The fourth condition is absolute. Apply for a green card, or start the process, and the exception is gone for that year, however Canadian the rest of your life is. If you’re thinking about staying in the US, plan both decisions together.

What If You’re Already Over And Never Filed?

Some readers will do this math and find winters that have already crossed the line. The form is clear: if you don’t file on time, you can’t use the exception and may be treated as a US resident.

The only way back is the same test as before: clear and convincing evidence that you tried to find out about the rule and took real steps to comply. That depends on your own facts, looking backwards, with US residency at stake. It’s the one part of this page not to handle alone. Bring the years and the day counts, and the exposure can be worked out before anyone files anything.

The Canada US Tax Treaty Tie-Breaker At 183 Days

Spend 183 actual days in the US in a year and Form 8840 no longer works. Now both countries can treat you as a resident: Canada because your ties are here, and the US because of its day count.

The Canada US tax treaty settles it, in Article IV. It runs through a set of tests and stops at the first one with an answer. The first test asks where you have a permanent home. Most snowbirds expect that to be Canada, and it usually is. Whether a place you use four months a year also counts as a permanent home depends on your facts, and it’s far cheaper to check in advance than after.

The treaty page covers the rest of the tests, and what this means if you hold a green card. Claiming residence under the treaty also has to be disclosed on Form 8833, filed with a US return.

And here’s the part that catches people. If the tie-breaker goes the US’s way, it fixes your US problem by creating a Canadian one.

Find out where your tie-breaker would land

What This Means For Your Canadian Tax Residency

The Canadian side catches fewer people, but when it does, it’s the expensive mistake.

Your Ties Keep You Canadian While You’re Away

Canadian residency depends on your ties, not your days. The CRA treats three ties as almost always decisive: a home here, a spouse or partner here, and dependants here. Other ties count in combination. The table below sets the CRA’s list next to the IRS’s.

Being away for a while doesn’t change that. The CRA’s guidance notes that the courts have consistently treated temporary absences, even long ones, as not enough to end Canadian residency.

For a snowbird, that’s good news. You stay a Canadian tax resident and keep filing here, and four months in the sun changes none of it.

Losing The Tie-Breaker Means Leaving Canada

Under Canadian law, if a treaty makes you a resident of another country, Canada treats you as a non-resident, even if you’d otherwise count as Canadian.

So if you spend enough days that Form 8840 stops working, and the treaty then decides you live in the US, Canada stops treating you as a resident. You didn’t move. A tie-breaker went the wrong way.

Leaving Canada has a cost. The CRA treats you as having sold certain property at its market value on the day you leave, even though you still own it, and taxes the gain. That’s departure tax, and the departure tax page explains it.

From then on, Canada taxes you like any other non-resident: only on your Canadian income, not on everything you earn.

Here’s what each country looks at:

Sources: the IRS closer connection factors as of 16 July 2026, and the residential ties in CRA folio S5-F1-C1. “Not on this list” means that country doesn’t name the factor, not that it can never matter.

5 Areas This Page Doesn’t Cover

So far, we’ve talked about the day count. Here are five topics that feel related but run on different rules:

1. Owning a US property. Renting it out, selling it, and US estate tax each have their own rules. The estate tax is the one people misjudge most.
2. Immigration. How long the US lets you stay is a separate system from the tax day count.
3. Provincial health coverage. Each province limits how long you can be away before coverage lapses, and the limits differ. Check yours against the trip you’re planning.
4. State taxes. Each state has its own income tax and residency rules. Nothing above is about any one state.
5. US reporting. If you’re treated as a US tax resident, reporting rules reach your Canadian accounts and registered plans, with penalties of their own. That’s a separate piece of work.

Snowbird Tax Rules Frequently Asked Questions (FAQs)

How many days can a Canadian snowbird stay in the US before paying US tax?

If you spend the same amount of time in the US every year, you can stay about 121 days a year without meeting the substantial presence test. Stay longer and you meet it, but you can still avoid US tax by filing Form 8840 each year, as long as you spend fewer than 183 days in the US that year and your real home stays in Canada.

What is the substantial presence test?

The substantial presence test is how the IRS decides whether a visitor counts as a US tax resident. You meet it if you spend at least 31 days in the US this year, and at least 183 days across three years. That count uses all of this year’s days, a third of last year’s, and a sixth of the year before.

What is Form 8840?

Form 8840, the Closer Connection Exception Statement for Aliens, tells the IRS that your real home is in Canada even though you met the substantial presence test. Filed on time, it keeps you a non-resident for US tax that year. It only works if you spent fewer than 183 days in the US that year and haven’t applied for a green card.

When is Form 8840 due?

Form 8840 is due by the deadline for Form 1040-NR. For most snowbirds with no US wages, that’s 15 June of the following year. If you don’t file a US return, you mail Form 8840 on its own to the IRS in Austin, Texas. Filing late usually means losing the exception for that year.

Do both spouses need to file Form 8840?

Yes. Each person files their own Form 8840, even if you travel together and share every day of the trip. A couple wintering in the US needs two forms every year they meet the test. Filing one form for the household is one of the most common mistakes snowbirds make.

Do I need a US tax number to file Form 8840?

No. Form 8840 asks for a US taxpayer identification number only if you already have one. If you’ve never had one, leave that line blank. The form is still valid, and you don’t need to apply for an ITIN just to file it.

What happens if I never filed Form 8840?

If you met the substantial presence test in past years and didn’t file, the IRS can treat you as a US resident for those years. The only way back is to show clear and convincing evidence that you tried to learn the rules and took real steps to comply. Get advice before filing anything late.

How long can Canadians stay in the US?

Canadian visitors can usually stay up to six months at a time, and the border officer decides the exact limit each time you enter. Anyone staying 30 days or more also has to be registered with the US government, which a flight’s I-94 record usually covers. The tax day count is separate, and it can apply sooner than the six-month border limit.

Count Your Last Three Years Before You Book The Next Winter

Here’s how to check yourself:

• Find three years of border crossings.
• Count the days by calendar year, not by winter.
• Take this year’s days in full, last year’s at a third, and the year before at a sixth.
• Find your row in the table above.

Under 183, you have room, and now you know how much. At 183 or above, you have a filing to make for that year. The sooner you know which year, the more choices you still have.

Bring that number to a consultation. Consultations are paid, and the scope is set out before you book. If your count has room in it, you’ll hear that, and you can go back to booking flights.

Book a consultation

The post The Snowbird Day Count And Form 8840: How Many Days Before The US Taxes You appeared first on Maxim.

Money crosses the Canada-US border for all kinds of reasons. For example:

• You moved to the US and kept a rental property in Calgary.
• You live in Canada and collect a US pension.
• You hold a US passport but haven’t lived there in years. Canada is home now.

A cross-border financial life can feel confusing. People worry about double tax, two sets of rules, multiple tax filings and overpaying all the time. The Canada-US tax treaty sorts that out. It decides which country taxes each kind of income, and caps how much the other can take.

People bump into the tax treaty all the time. The problem is that they don’t always get it right.

For example, say you live in the US, and a Canadian company pays you a $1,000 dividend. Canada taxes non-resident dividends at 25%, withheld before you’re paid. You expect $750.

The treaty caps that at 15% for US residents, so $850. But instead, you got $750. Nothing went wrong. Treaty rates are ceilings, not automatic discounts. You have to claim them in writing before the money moves. Until you do, your payer has to withhold the full 25%.

That missing $100 comes down to one form nobody sent. This page covers which form, and what else the treaty changes.

The Canada US Tax Treaty, Explained

What the treaty does. It decides which country taxes each type of income you earn across the border. Where both countries can tax it, the treaty caps what the country the money comes from can take. Some income is only taxed where you live: ordinary interest, most software, patent and copyright royalties, and social security.

How you get the lower rate. The treaty rate is a maximum you claim, not a rate you get automatically. You claim it with a form you give the company paying you, not a tax authority. Give Form NR301 to a Canadian payer, and Form W-8BEN to a US one.

What it doesn’t change. If you’re a US citizen, you file a US tax return every year, wherever you live. The treaty keeps that rule in place. It stops you paying tax twice, but it doesn’t remove the filing.

Two dates matter. Your NR301 expires three years from the end of the year you signed it. If too much Canadian tax was taken, you have two years from the end of the year it was sent to the CRA to claim it back.

On This Page

• How The Treaty Decides Which Country Taxes What
• Canada US Treaty Withholding Rates By Income Type
• How To Claim A Canada US Treaty Rate
• What The Treaty Means For US Citizens In Canada
• What The Treaty Does For Your Retirement Accounts
• When Form 8833 Is Required
• 8 Common Canada-US Treaty Mistakes To Avoid
• Canada US Tax Treaty Frequently Asked Questions (FAQs)
• Get The Treaty Working Before The Next Payment

How The Treaty Decides Which Country Taxes What

The treaty is long, which is why most people never open it. It’s really a list of numbered articles. Each one takes a type of income and says which country can tax it. You usually only need the one or two that cover your own income.

Most Income Goes To One Country

Employment income, meaning your salary or wages, is the simplest. Article XV says your salary is taxed where you live, unless you do the work in another country. Live and work in Calgary, and Canada taxes your pay. Cross the border to do the work, and the US can tax that part.

Short trips have exceptions. Say your Calgary employer sends you to Seattle for 90 days to set up a new client. Your pay usually stays Canadian, because you were there for under 183 days and your Calgary employer paid you, not a US one. The table below lists both tests.

Property sales depend on the property. Under Article XIII, a gain on a house in Arizona can be taxed by the US, because the house is there. If you’re a Canadian tax resident, you report that gain in Canada too, and Canada gives you a credit for the US tax so you don’t pay twice.

A gain on your investment portfolio is usually taxed only where you live. If your investments are held outside your home country, that country may withhold tax on them. Again, the treaty lets you claim foreign tax credits so you avoid double taxation.

Pensions follow Article XVIII, covered in the retirement section below. US citizens are the big exception to all of this, covered in the section on US citizens.

Where Both Countries Can Tax, The Treaty Sets A Maximum

For some income, both countries get a share. The treaty lets the country the money comes from take some, up to a limit. Every limit is in the table below. Three things about them don’t fit in the table.

• Beneficial owner. Most limits only apply if you’re the beneficial owner. That just means the income is really yours, not held for someone else by a broker or nominee.
• Regular pension payments. The 15% limit on pensions covers regular payments. A lump-sum RRSP withdrawal isn’t one, so Canada’s full 25% applies instead.
• Ordinary interest. Most interest from Canada never needed the treaty. Canadian tax law only taxes interest between connected people, or interest tied to the borrower’s profits. The non-resident tax page explains how.

First, The Treaty Decides Where You Live

Everything else depends on which country you live in for tax purposes. Usually that’s obvious. Sometimes both countries claim you in the same year, each under its own rules. Canada looks at your ties here, like a home, a spouse and dependants. The US looks at citizenship, a green card, or days spent there. The snowbird page covers the US day count.

When both countries claim you, Article IV breaks the tie. It runs through a set of tests in order and stops at the first one that gives an answer, starting with where you have a permanent home. If every test ties, the two tax authorities settle it between themselves, which can take a long time. The best way to avoid that is by creating a residency timeline and narrative with a cross-border professional.

Canada US Treaty Withholding Rates By Income Type

Here’s what the treaty caps, and the form each country’s payer needs before using the lower rate:

Rates as updated by the protocol signed 21 September 2007, the treaty’s most recent change. Without the treaty, Canada’s default rate is 25%, and the US default is 30% on most US income paid to foreign people.

The forms go to the company paying you, not a tax authority. Form 8233 is the exception: the payer sends a copy to the IRS within five days. The US column assumes you’re not a US person. US citizens and green card holders give the payer a Form W-9 instead.

Here are some more things to keep in mind:

1. Similar-sounding income can be taxed very differently. A software royalty and a film royalty are both royalties. Only the film royalty can be taxed where it’s paid from. On a big contract, that difference can be worth six figures.
2. Canadian employers withhold even when the treaty exempts you. If you work in Canada and the treaty says Canada can’t tax the pay, your Canadian payer still has to withhold, unless you have a CRA waiver or they’re a certified non-resident employer. The waiver is Form R102-R, and it should be filed 30 days before the work starts.
3. US payers need a tax number. A W-8BEN needs a taxpayer identification number, American or foreign, with a narrow exception for some investments. Payment for personal services uses Form 8233 instead.
4. US social security is taxed where you live. If you live in Canada, Canada taxes your US social security like a CPP benefit, and 15% of it is tax-free. Plenty of people believe the opposite and act on it for years.

How To Claim A Canada US Treaty Rate

Back to that $1,000 dividend and the missing $100 we mentioned before. The fix is a form you give your payer before they pay you.

The CRA tells payers to confirm three things before using a treaty rate:

• that the income is really yours
• which country you live in for tax purposes
• that you qualify for the treaty

Form NR301 is the usual way to confirm all three. The CRA accepts the same details in another written form, but NR301 is the simplest route. Partnerships and some other entities use a different form.

If a payer asks for these details and you don’t give them, the CRA tells the payer to withhold the full 25%. More often, nobody asks and the form never comes up. Either way, the declaration is what changes the rate.

Qualifying for the treaty sounds hard, but for a person it isn’t. Article XXIX A limits the treaty to “qualifying persons”, and any individual who lives in Canada or the US counts. That article is really aimed at companies and trusts.

The biggest mistake is thinking the lower rate applies to you automatically. It’s the rate you’re allowed to ask for. Asking means a form, and it has to reach your payer before your payment does.

If Too Much Was Already Taken

You can often get it back. Form NR7-R is how you apply for a refund of over-withheld Canadian tax. The CRA has to receive it within two years of the end of the calendar year the tax was sent to the CRA. After that, the money is gone.

Your NR301 also expires. It lasts three years from the end of the calendar year you signed it, or less if your situation changes. A form signed any time in 2023 runs out at the end of this year, and nobody writes to remind you.

What The Treaty Means For US Citizens In Canada

Most of the treaty divides income between the two countries, one type at a time. Then one clause, called the saving clause, changes the picture for US citizens.

It’s in Article XXIX(2)(a). In short, it says the treaty doesn’t change how each country taxes its own residents, and in the US’s case, its own citizens. Canada taxes the people who live here. The US taxes its citizens wherever they live, and the treaty leaves that alone. There are exceptions, including the double-tax relief and most of the pension rules.

The IRS says it plainly. If you’re a US citizen or green card holder living in Canada, you still have to file a Form 1040 and report your worldwide income every year. A lot of US citizens living in Canada are surprised they still have US tax filing obligations.

This catches people who barely think of themselves as American. Say you were born in Calgary to an American parent and got a US passport at 19 because it seemed useful. You’ve lived in Canada your whole life. Once your income passes the US filing threshold, you owe a US return every year, and you have since it passed.

The treaty does stop you paying tax twice. Under Article XXIV, Canada gives you credit for US tax first, up to what a non-citizen would have paid the IRS on that income. The US then credits the Canadian tax that’s left.

That fixes the tax, but not the paperwork. You still file two returns every year, and someone has to prepare both. There’s no planning around this one. If you’re a US citizen building a life in Canada, talk with a cross-border CPA so you stay onside with the IRS.

What The Treaty Does For Your Retirement Accounts

One part of the treaty, Article XVIII(7), protects retirement accounts held across the border. It also works in both directions.

Your RRSP, Seen From The US Side

If you’re a US citizen or resident with an RRSP, the default is surprising. The US taxes the growth inside the RRSP every year, even if you never take money out. The treaty lets you switch that off, but you have to choose it.

That used to mean filing Form 8891, and many people missed it. Since 2014, Revenue Procedure 2014-55 treats most people as having made the choice automatically, back to the first year they could have. The IRS dropped Form 8891 completely. If anyone tells you to file it for past years, that advice is more than a decade out of date.

There’s one catch. If the growth inside your RRSP ever appeared on a US return of yours, the automatic choice doesn’t cover you. You’d need to ask the IRS for permission to choose late.

This covers RRSPs, RRIFs, registered pension plans and deferred profit sharing plans. It doesn’t cover a TFSA, because a TFSA isn’t a pension. It also doesn’t change your reporting. Form 8938 and the FBAR, FinCEN Form 114, have their own thresholds, and you may still need to file them.

Your 401(k) Or IRA, Seen From The Canadian Side

The same rule works in reverse. If you live in Canada and hold a 401(k) or IRA, you can choose to defer Canadian tax on the growth inside it.

A Roth IRA needs extra care. The CRA’s guidance on Roth IRAs says it only counts as a pension if you make no contributions while living in Canada. Put in even one contribution after you move, and the account splits. What was already there keeps its protection. Growth after that becomes taxable in Canada every year.

The Roth election also has an early deadline. It should be filed by your Canadian tax filing deadline for the year you became a resident, which is usually the first spring after you move.

Get it right and qualified Roth withdrawals stay tax-free in Canada, the same as they would in the US.

Withdrawals have their own trap. Regular payments from a US plan to someone in Canada are capped at 15%, the same as Canadian pensions paid into the US. Take everything in one lump sum and the cap doesn’t apply, so the full 30% US rate does.

When Form 8833 Is Required

The US wants to know when you use the treaty to override its own tax rules. The form is Form 8833, and missing it can cost $1,000, or $10,000 for a C corporation.

For most people, that’s less scary than it sounds. The IRS doesn’t need the form for everyday treaty claims: a lower rate on dividends, interest, rent or royalties, or treaty rules on your pay, pension, annuities or social security. That covers almost everything in the table above. The IRS says its list isn’t complete, so treat it as a guide.

You do need it when the treaty changes where you live for tax, not just your rate. The main example is using the Article IV tie-breaker to be treated as a Canadian resident when the US would otherwise count you as its own.

That comes with a serious trap for green card holders. Hold a green card long enough and the US treats you as a long-term resident. If you then use the treaty to be treated as a Canadian resident, the form says you “will be deemed to have expatriated.” In plain terms, it can end your US tax residency and bring in the US expatriation tax. Get advice before you file it.

So keep the two apart. A treaty rate is routine and goes to your payer. A treaty claim about where you live goes to the IRS, on a form, with a penalty for getting it wrong.

8 Common Canada-US Treaty Mistakes To Avoid

Avoid these treaty mistakes to prevent future headaches.

1. Assuming the lower rate is automatic. It’s a maximum you have to claim. Without a form on file, your payer takes the full rate, and they’re right to.
2. Letting your NR301 expire. It lasts three years from the end of the year you signed it, or less if things change. Nobody reminds you.
3. Filing NR301 for ordinary interest. Ordinary interest from an unconnected borrower isn’t taxed by Canada, so there’s nothing to claim and no form to send.
4. Taking a retirement plan as a lump sum. The 15% cap only covers regular payments. A single withdrawal gets the full 25% or 30%.
5. Contributing to a Roth after moving to Canada. One contribution splits the account, and growth after it becomes taxable in Canada.
6. Missing foreign tax credits. Tax paid in one country usually counts against the other. Tax paid on that Arizona home sale, for example, is credited on your Canadian return.
7. Assuming a TFSA shelters you from US tax. The US doesn’t honour it. A US citizen or resident pays US tax on the growth.
8. Skipping foreign reporting. A country that doesn’t tax an account may still want it reported. A US person with an RRSP, for example, still has to disclose it. Both countries have disclosure rules with penalties of their own.

Canada US Tax Treaty Frequently Asked Questions (FAQs)

What is the Canada US tax treaty?

The Canada US tax treaty is an agreement between the two countries that decides which one taxes each kind of cross-border income. Where both can tax it, the treaty caps what the country the money comes from can take. It applies to anyone who lives in one country and earns income from the other, like dividends, pensions, rent or pay for work.

How do I get the treaty rate on Canadian dividends?

Give Form NR301 to the Canadian company or broker paying you, before they pay you. Without it, your payer has to withhold the full 25% on dividends. With it, a US resident usually pays 15%. The form confirms the income is yours, where you live for tax purposes, and that you qualify for the treaty.

Do Canadians need to fill out a W-8BEN?

Yes, if you’re a Canadian resident earning income from a US source, like dividends from US stocks. You give Form W-8BEN to your US broker or payer, not the IRS. It cuts US withholding on dividends from 30% to 15%. Your Canadian social insurance number usually works as the foreign tax number the form asks for. The form stays valid until the end of the third calendar year after you sign it.

Can I keep my Roth IRA if I move to Canada?

Yes. A Roth IRA can stay tax-free in Canada, but only if you stop contributing once you become a Canadian resident. Even one contribution after you move makes future growth taxable in Canada every year. You also need to file an election with the CRA by your filing deadline for the year you became a resident, which is usually the first spring after you move.

How is US social security taxed if I live in Canada?

If you live in Canada, only Canada taxes your US social security. The US doesn’t withhold on it. Canada treats it much like a CPP benefit, and for most people 15% of it is tax-free. Many people assume the US taxes it because that’s where it comes from, and report it the wrong way for years.

Does the treaty stop double taxation for US citizens living in Canada?

It stops you paying tax twice, but it doesn’t stop you filing twice. US citizens file a US return every year wherever they live, because of the treaty’s saving clause. Canada gives you credit for US tax first, and the US then credits the Canadian tax that’s left. You still need both returns prepared every year.

Do I need to file Form 8833?

Most people don’t. The IRS waives Form 8833 for everyday treaty claims, like a lower rate on dividends, interest or royalties, or treaty rules on pensions and social security. You do need it when you use the treaty to change where you live for tax, for example claiming Canadian residence under the tie-breaker rules. Missing it can cost $1,000.

What if too much Canadian tax was withheld?

You can apply for a refund on Form NR7-R. The CRA has to receive it within two years of the end of the calendar year the tax was sent to the CRA. After that, the money can’t be recovered. To stop it happening again, give your payer Form NR301 before the next payment.

Get The Treaty Working Before The Next Payment

Almost everything the treaty offers has to be set up before you’re paid. A form that arrives in February doesn’t help a dividend paid in January.

So if money moves between Canada and the US regularly, whether it’s a dividend, a royalty, a pension or rent on a property you kept, ask two questions. Has someone filed the form that makes the treaty apply to you? And when does that form run out?

For most people that takes one conversation. If you have a company in one country and a home in the other, it takes longer, and finding out late can cost you that 10% gap on everything already paid. The first consultation is paid, and it ends with a straight answer, even when the answer is that nothing needs doing.

Talk through your treaty position

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