Canada Tax Guide

Residency and Residential Ties

Canadian tax residency is a question of fact built on residential ties:

• Significant ties. A dwelling available in Canada, a spouse or common-law partner in Canada, or dependants in Canada.
• Secondary ties. Personal property, bank accounts and credit cards, health coverage, a driver's licence, and social memberships, weighed together.
• Deemed residence. Sojourning in Canada for 183 days or more in a calendar year generally makes a person a deemed resident for the whole year if they are not factually resident.

Treaties override: a person factually resident in Canada but treaty-resident elsewhere can be deemed non-resident of Canada, which changes the whole filing picture.

Who Has to File

Residents generally file a T1 return reporting worldwide income whenever tax is payable, and often even without tax due, because many benefits (like the GST/HST credit and the Canada Child Benefit) require filing. Part-year residents report worldwide income only for the resident part of the year.

Non-residents file only for certain Canadian-source income, such as Canadian employment or business income and gains on taxable Canadian property; passive income like dividends is generally settled by withholding instead.

Tax Rates (2025)

Federal brackets for 2025, before provincial tax:

*The lowest federal rate was cut from 15% to 14% effective July 1, 2025, producing an effective 14.5% rate for the 2025 year. Every province and territory adds its own progressive tax; combined top rates range from roughly 44% to 55% depending on the province.

Capital gains and dividends

Generally 50% of a capital gain is included in taxable income (a proposed increase to the inclusion rate was cancelled in 2025). Eligible Canadian dividends use a gross-up and credit system that lowers their effective rate.

Key 2026 Deadlines

Foreign Assets: Form T1135

Residents holding specified foreign property with a total cost above CAD 100,000 at any time in the year generally must file Form T1135. It covers foreign accounts, securities, and rental or investment real estate, but generally not personal-use property or most foreign pension plans. Penalties for missing it accrue per day.

Foreign income remains taxable regardless of the T1135; a foreign tax credit generally offsets income tax paid abroad, calculated country by country.

Leaving Canada: Departure Tax

Emigration generally triggers a deemed disposition of most property at fair market value on the departure date, taxing accrued gains even though nothing was sold. Key exceptions include Canadian real estate, RRSPs and similar registered plans, and property owned before arrival by short-term residents.

The departure return sets the residency end date (generally when significant ties end), and elections exist to defer the departure tax with security. After leaving, Canadian-source income such as rental income moves onto non-resident withholding rules.

Newcomers

Residency generally starts the day significant ties are established. Newcomers report worldwide income only from that date, get pro-rated credits in the first year, and receive a cost-basis step-up: property owned on arrival is generally treated as acquired at its value that day, so pre-arrival gains stay outside Canadian tax.

First-year filers often need to apply separately for benefits, and filing even with modest income opens RRSP room and benefit entitlements.

Tax Treaties

Canada has over 90 double tax treaties in force. The Canada-US treaty is one of the most heavily used in the world, covering cross-border workers, pensions, and investment income in both directions.

Treaty tie-breakers

When a person qualifies as a tax resident of both Canada and another country, the treaty tie-breaker typically checks: permanent home, center of vital interests, habitual abode, and nationality, in that order. Winning the tie-breaker abroad can make someone a deemed non-resident of Canada.

The year of the move

Arrival and departure years combine part-year reporting, the deemed disposition rules, and treaty analysis. It is generally the most complex Canadian return a person will file, and a natural moment to involve a professional.

Frequently Asked Questions

Does 183 days in Canada make me a tax resident?

Sojourning 183 days or more in a calendar year generally makes someone a deemed resident for that whole year, taxed on worldwide income, unless a treaty places them elsewhere. Below 183 days, residency depends on ties: a home, spouse, or dependants in Canada generally matter more than the day count.

What is Form T1135?

An annual information return for residents whose specified foreign property costs more than CAD 100,000 in total at any point in the year. It reports foreign accounts, investments, and non-personal real estate, and it is separate from reporting the income itself.

What is departure tax?

When someone stops being a Canadian resident, most property is treated as sold at fair market value on the departure date, so accrued gains become taxable in the departure return. Canadian real estate and registered plans like RRSPs are the main exceptions, and deferral elections exist.

When are the 2026 filing deadlines?

April 30, 2026 for most individuals (filing and payment for the 2025 year), and June 15, 2026 for the self-employed and their partners, with payment still due April 30.