Moving from Canada to the US Is More Than a Change of Address

If you are moving from Canada to the United States, tax planning should be part of your relocation checklist.

Many people focus on immigration, employment, housing, and banking. Those are important, but the tax side can be just as important. A move can affect where you are taxed, what returns you need to file, and how your assets are treated when you leave Canada.

The right tax treatment depends on your facts, including when you move, whether your family moves with you, what ties you keep in Canada, the type of US visa or status you have, and what assets you own.

1. Determine Your Canadian Tax Residency

The first question is whether you will become a non-resident of Canada for tax purposes.

CRA generally considers you an emigrant for income tax purposes if you leave Canada to live in another country and sever your residential ties with Canada. Residential ties can include your home, spouse or common-law partner, dependants, personal property, and social ties.

If you leave Canada but keep significant residential ties, you may remain a factual resident of Canada. In some cases, if you are also considered resident in another country under a tax treaty, you may be treated as a deemed non-resident of Canada.

This is an important first step because your Canadian residency status affects how Canada taxes you after the move.

2. Identify Your Departure Date

Your departure date matters because it determines when your Canadian tax residency may end.

CRA states that when you leave Canada to settle in another country, you usually become a non-resident of Canada on the latest of:

• The date you leave Canada
• The date your spouse or common-law partner and dependants leave Canada
• The date you become a resident of the country where you settle

This date can affect your final Canadian tax return, departure tax calculations, foreign reporting, and the timing of income recognition.

3. File a Canadian Departure Return

For the year you leave Canada, you may need to file a Canadian tax return reporting your income up to the date of departure.

CRA notes that emigrants may need to file a Canadian return if they owe tax or want to receive a refund. CRA also notes that if you owned property or goods when you left Canada, you may have to report a capital gain.

Your departure return may include:

• Your date of departure from Canada
• Canadian and foreign income earned before departure
• Certain income earned after departure, depending on the source
• Any required departure tax reporting
• Disclosure of certain property owned at the time of departure

4. Review Canada’s Departure Tax Rules

One of the biggest surprises for Canadians moving to the US is departure tax.

When you cease to be a resident of Canada, CRA generally deems you to have disposed of certain property at fair market value and to have immediately reacquired it at the same amount. This is called a deemed disposition.

In simple terms, Canada may treat you as if you sold certain assets when you left, even if you did not actually sell anything.

This can apply to many types of capital property, such as:

• Non-registered investment portfolios
• Shares of private corporations
• Certain foreign property
• Certain partnership interests
• Other appreciated capital property

Some property is excluded from the deemed disposition rules, including certain Canadian real property, Canadian business property connected to a permanent establishment in Canada, and many registered plans such as RRSPs, RRIFs, RESPs, RDSPs, TFSAs, and other excluded rights or interests.

Because departure tax can create tax without a sale of assets, it should be reviewed before the move.

5. Review Registered Accounts Before You Move

Canadian registered accounts may be treated differently in Canada and the US.

You should review accounts such as:

• RRSPs and RRIFs
• TFSAs
• FHSAs
• RESPs
• RDSPs
• Employer pension plans

Some accounts may remain tax-deferred or tax-efficient in Canada, but may not receive the same treatment under US tax rules. This is especially important after you become a US tax resident.

Before moving, it is worth reviewing whether to keep, contribute to, withdraw from, or restructure any accounts.

6. Consider Canadian Corporations and Business Interests

If you own shares of a Canadian corporation, leaving Canada can create additional tax complexity.

Issues may include:

• Departure tax on private company shares
• Ongoing Canadian corporate tax filings
• US reporting for foreign corporations
• Shareholder compensation after the move
• Dividends paid to a non-resident
• Cross-border payroll or management fees
• Canada-US treaty considerations

This area often requires planning before departure, especially for business owners, incorporated professionals, and shareholders of private corporations.

7. Review Stock Options and Equity Compensation

If you are moving to the US for employment, stock options, restricted share units, deferred compensation, or other equity awards should be reviewed carefully.

The tax treatment may depend on:

• When the award was granted
• Where you worked during the vesting period
• When the award vests or is exercised
• Whether Canada or the US has taxing rights
• Whether foreign tax credits may be available
• State tax treatment

This can be particularly important for executives and employees relocating with a multinational employer.

8. Understand US Tax Residency

After moving to the US, you may become a US tax resident.

For non-US citizens, the IRS generally treats an individual as a US tax resident if the person meets either the green card test or the substantial presence test. The IRS also notes that a person can be both a non-resident and resident for US tax purposes in the same year, often in the year of arrival or departure.

The substantial presence test generally looks at whether you were physically present in the US for at least 31 days in the current year and 183 weighted days over the current year and two prior years.

Once you are a US tax resident, the US may tax you on worldwide income, subject to applicable rules, credits, and treaty provisions.

9. Do Not Forget US State Tax

US state tax can be a major part of the move.

Unlike Canada, US state tax rules vary significantly by state. Some states have high income tax rates, some have no state income tax, and some have complex residency rules.

Before moving, consider:

• Which state you are moving to
• Whether you will work remotely
• Whether your employer is located in a different state
• Whether you will keep property or ties in another state
• Whether state tax applies to stock options, bonuses, or deferred compensation

State tax is often overlooked, but it can materially affect the overall cost of moving to the US.

10. Plan for Foreign Reporting After the Move

After becoming a US tax resident, Canadian accounts and assets may become foreign assets for US reporting purposes.

Depending on your facts, you may need to consider US forms such as:

• FBAR
• Form 8938
• Forms for foreign corporations or partnerships
• Forms for certain foreign trusts or gifts
• Reporting related to Canadian registered accounts

At the same time, if you remain a Canadian tax resident for part of the year, Canadian reporting may also need to be reviewed.

Common Mistakes

Common mistakes include:

• Assuming Canadian tax residency ends automatically when you move
• Forgetting to review departure tax before leaving
• Keeping significant Canadian ties without understanding the residency impact
• Ignoring US state tax
• Overlooking Canadian corporations or private company shares
• Assuming Canadian registered accounts receive the same tax treatment in the US
• Not reviewing stock options or deferred compensation before departure
• Filing Canadian and US returns separately without coordinating the positions

These issues are easier to manage before the move than after tax filings are already due.

Final Thoughts

Moving from Canada to the US can create tax consequences in both countries. The key issues usually involve residency, departure tax, asset reporting, US tax residency, and state tax.

A proper plan can help you understand what filings are required, what risks need to be managed, and what steps should be taken before and after the move.

If you are planning a move from Canada to the US, Confectus can help you review your Canadian and US tax position, identify planning opportunities, and build a clear cross-border tax checklist for your situation.

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This article is intended for general informational purposes only and does not constitute tax, accounting, legal, financial, or professional advice. The information may not apply to your specific situation, and rules or guidance may change over time. You should consult a qualified professional advisor before making decisions or taking action based on this information.