Sell, Keep or Rent Your House When Leaving Canada: Tax Compared

Should I sell my house before leaving Canada? What each choice costs

Your Canadian home is not part of departure tax. When you stop being a resident, Canada treats most of what you own as sold, but Canadian real or immovable property is excluded (Income Tax Act, 128.1(4)(b)). The home stays taxable in Canada, so the choice you make now decides how its gain is taxed later.

Section 116 is the clearance a non-resident seller asks the CRA for; without it the buyer holds back 25% of the price. A 45(2) election is a letter that cancels the deemed sale when you start renting. Form NR6 lets the rent be withheld on net rent instead of gross.

None of the three is right for everyone. A case is not simple when the gain is large, you bought the home only a short time before leaving, a spouse or children stay in it, you start renting in the same year you leave, or you lived in Quebec, which has its own return. Gather the purchase price and date, the cost of major improvements, an estimate of the home's value on your departure date, and, if you will rent, the lease and the date the tenant moves in.

Does leaving Canada count as selling my home for departure tax?

No. The deemed sale on departure excludes real or immovable property situated in Canada, so your home is not on the departure list and creates no gain on your final resident return. The home's gain is taxed only when you actually sell it, or when a change in use counts as a sale.

Departure tax on your other property, such as shares and investment accounts, is covered in leaving Canada.

If I sell before I leave, is the whole gain tax-free?

It can be. A home that was your principal residence for every year you owned it, while you were resident in Canada, can have its whole gain exempt under the formula in section 40(2)(b). If you bought it before you became a resident, or another home was your principal residence for some years, part of the gain can be taxable. You still report the sale on Schedule 3 and designate the home on Form T2091(IND) on your departure return.

One exception: if you owned the home for less than 365 consecutive days, the gain is generally treated as business income and the exemption does not apply (Income Tax Act, 12(12) and 12(13)). A sale caused by a listed life event, such as a move for a new job, including one abroad, can be outside this rule.

Section 116 applies to a non-resident person who sells taxable Canadian property. If the sale closes while you are still resident, there is no certificate to request and no buyer holdback. If closing slips past your departure date, you are selling as a non-resident and the non-resident sale rules apply. Your departure date is usually the latest of the day you leave, the day your spouse or partner and dependants leave, and the day you become resident in your new country. If you are returning to a country you lived in before Canada, it is usually the day you leave, even if your spouse stays behind to sell the home.

For the exemption rules and the designation itself, see the principal residence exemption.

If I keep my house empty after moving abroad, could the CRA say I never left?

It could. The CRA treats a dwelling you keep available in Canada as a significant residential tie (Folio S5-F1-C1, ¶1.11 to 1.12). The CRA's position is that unless you sever all significant residential ties when you leave, you generally remain a factual resident (¶1.10). You would then stay taxable in Canada on your worldwide income unless a tax treaty makes you a resident of your new country.

A home leased to a third party on arm's-length terms may not be a significant tie on its own, though the CRA still weighs all the circumstances (¶1.12 and ¶1.27). A home left furnished, empty and ready for your return, or lent to a relative at a low rent, points the other way. For the full list of ties, see Canadian tax residency; to ask the CRA for an opinion, see Form NR73.

Can I keep my house if I become a non-resident?

Yes, but keeping it has two tax costs.

• Exemption: only years you were resident in Canada count toward the exemption, but every year you own it counts in the formula. The exempt part is a fraction of the whole gain by years, so a share of the total gain in proportion to your years abroad is generally taxable when you sell, whatever the value did in those years (Folio S1-F3-C2, ¶2.20).
• Sale paperwork: a later sale is a non-resident sale under section 116. See selling your home after leaving Canada for how the exemption is split.

Rent out my house when moving abroad: what is the Canada tax?

Renting the whole home is a change in use: the CRA says you are considered to have sold the property at its fair market value and bought it back at the same value. The gain on that deemed sale can be reduced or eliminated by the principal residence exemption for the years the home was your principal residence (Folio S1-F3-C2, ¶2.48), and your cost for the later sale becomes the value on the day renting started. The rent then draws 25% withholding on gross rent while you are a non-resident, unless the CRA approves Form NR6 so it is withheld on net rent. The payer, your tenant or a Canadian property manager acting for you, must withhold and remit it.

The yearly filings for a non-resident landlord, NR6 and the section 216 return, are covered in non-resident landlords.

What does the section 45(2) election do for someone leaving Canada?

A section 45(2) election cancels the deemed sale when you start renting: you are treated as not having changed the use. You make it by letter with the return for the year renting starts; the steps are in turning a home into a rental.

For someone leaving, the election does less than it does for someone who stays.

• No extra exempt years abroad. The election can let a home count as your principal residence for up to four more years, but only for years you are resident or deemed resident in Canada (Folio S1-F3-C2, ¶2.48 to 2.50).
• No CCA. If you claim capital cost allowance (CCA, depreciation on the building) on the home, the election is treated as rescinded from the first day of that year (Folio S1-F3-C2).
• Trade-off. Without the election, the deemed sale at the start of renting resets your cost to the home's value then; with it, the later sale measures the gain from your original cost. Which result is better depends on the numbers.

Do the years I live abroad count toward the principal residence exemption?

No. The exemption formula counts only years you were resident in Canada. The extra "one plus" year in the formula applies only if you were resident in the year you bought the home (Folio S1-F3-C2, ¶2.20). If you were not resident for your whole ownership, the CRA asks you to call it.

Can I elect to include the home in the departure deemed sale?

Yes. The CRA lets an emigrant elect to report a deemed sale of Canadian real property on Form T2061A, treating the home as sold at its value on the day you leave. The home's gain to that day is then reported on your departure return, where the principal residence exemption may apply to the resident years, and your cost for a later sale becomes the departure-day value.

Whether the election helps depends on your facts: how the value moves after you leave, your other gains and losses on departure, whether the home was your principal residence every year, and how you will use it after leaving. Because it changes your departure return, the choice is made when that return is filed.

What records should I keep on departure day if I keep the home?

Keep the evidence you will need to measure the gain years from now:

• purchase agreement and closing statement, showing price and date
• receipts for major improvements (not routine repairs)
• an estimate or appraisal of the home's value on your departure date, and on the day renting starts if that is a different day
• proof of the date you left and settled abroad (travel, a lease or job abroad), since that date sets which values count
• the lease, the tenant's move-in date and proof the rent is at market rates
• a copy of any 45(2) election letter, T2061A or T1161 you file

Keeping the home does not keep it off your departure paperwork. If everything you owned on the day you left was worth more than $25,000, you must list the home on Form T1161 by your filing due date, even though it is not deemed sold and even if you owe no tax. Filing late costs $25 a day, from $100 up to $2,500; see leaving Canada.

50% of any capital gain left after the exemption is included in income, so the cost and value records directly drive the tax.

What about the mortgage, a spouse who stays, and the Underused Housing Tax?

• Mortgage: a mortgage does not change the gain or the exemption; the gain is the selling price less your cost and selling expenses. If you rent the home, the mortgage interest reduces the tax on rent only through the NR6 or section 216 route; the default withholding is on gross rent. If you sell later as a non-resident, the buyer's holdback without a certificate is figured on the price, so paying off the mortgage and the holdback can leave little cash at closing; see non-residents selling Canadian property.
• Spouse or children who stay: the home they live in is likely to be a significant tie for you, and a family unit has one principal residence per year. See family stays in Canada while you work abroad.
• Underused Housing Tax: owners do not need to file a return or pay the tax for 2025 and later years. Affected owners still have any return and tax due for 2022, 2023, and 2024. Canadian citizens and permanent residents are generally excluded owners, except when they hold the home as a trustee or partner.

Example

All figures are illustrative, in Canadian dollars.

Sell before leaving

Ana bought her home for C$400,000 while resident and, after owning it for eight years, sells it for C$900,000. The sale closes two weeks before she leaves. Every year she owned it, she was resident and the home was her principal residence, so the C$500,000 gain may be fully exempt. She reports the sale on Schedule 3 and T2091(IND) on her departure return. No section 116 certificate is needed because she is resident at closing.

Rent out after leaving

Ben owns the same home and leaves Canada. The home is worth C$900,000 when his tenant moves in after his departure.

• Year he leaves: starting to rent is a deemed sale at C$900,000. Without a 45(2) election he reports it and designates the home on Schedule 3 and T2091(IND), so the C$500,000 gain may be fully exempt and his cost becomes C$900,000. With the election, there is no deemed sale and his cost stays C$400,000.
• Each year abroad: rent of C$3,000 a month draws 25% withholding (C$750 a month) unless the CRA approves an NR6.
• Year he sells: without the election, the gain above C$900,000 is taxable; with it, the gain is measured from C$400,000 and only his resident years count toward the exemption. Either way the sale goes through section 116.

Keep it empty

Chen leaves the home furnished, with the keys at a relative's. When the CRA reviews when Chen stopped being resident, it may weigh the available home as a significant residential tie. When Chen sells years later, the years abroad earn no exemption and the sale goes through section 116.

Different for you?

• Your gain is large, or you bought the home shortly before leaving: the exemption fraction, the 365-day rule and the T2061A and 45(2) choices can move the tax a lot; get individual tax help.
• You start renting the home in the year you leave: the change in use, the 45(2) election and your departure return interact; see individual tax help.
• You already left and have been renting without an NR6, section 216 returns or a decision on the change in use: see non-resident landlords and get individual tax help to catch up.
• Your spouse or children stay in the home: see family stays in Canada while you work abroad and individual tax help.
• You lived in Quebec: Quebec has its own return and its own rules for leaving; see leaving Quebec and get individual tax help.
• You already left and now want to sell: see selling your home after leaving Canada.
• You also own a cottage or second home: see cottage or second home when leaving Canada.
• You are moving to the United States: see selling your Canadian home after moving to the US or renting it out after the move.
• You are unsure whether you have left at all: see Canadian tax residency.