If I leave Ontario permanently mid-year, how does Canada tax my income for that year?

When you permanently leave Canada you become a part-year resident. You are taxed as a Canadian resident for the portion of the year you were here, and as a non-resident for the rest. On your T1 return for the year of departure you report worldwide income earned up to your departure date, then only Canadian-source income (if any) after that.

The bigger concern is departure tax. On the day you leave Canada, you are deemed to have sold most of your capital property at fair market value. If you have accrued gains — on investments, rental property outside Canada, foreign property, or a business — those gains become taxable on departure even though you have not actually sold anything. The deemed disposition does not apply to Canadian real estate, RRSPs, RRIFs, or most RPP interests.

Some countries have tax treaties with Canada that reduce departure-related withholding or defer certain gains. If you are moving to a treaty country, review the treaty before you leave. A tax professional can help you calculate potential departure tax and consider whether to elect out of the deemed disposition on certain property.