BC to Florida: Departure Tax, RRSP, and the Retiree Move

British Columbia to Florida is a retiree corridor more than a career one. The tech worker leaving Vancouver usually goes to Seattle or the Bay Area; the person leaving BC for Florida is more often selling a Vancouver or Victoria home, consolidating a large RRSP, and going permanent after years of wintering in Naples or Palm Beach. That profile has its own tax shape, and the biggest number in it is usually the BC home, not the departure tax.

Key takeaways

• BC's combined top marginal rate is about 53.5%. On a $300,000 unrealized gain, departure tax is roughly $80,000.
• The BC home is not caught by departure tax, but if you keep it, BC's Speculation and Vacancy Tax and the federal Underused Housing Tax can both apply to a non-resident owner.
• MSP coverage ends when you leave BC permanently. There is no premium to cancel, but the coverage gap is real.
• Florida has no state income tax, so your RRSP and RRIF withdrawals are taxed federally only, with the treaty's 15% periodic rate on the Canadian side.
• Florida's homestead calendar (January 1 ownership, March 1 application) is the most common thing BC retirees get wrong in year one.

The BC departure

The deemed disposition on leaving Canada catches non-registered investments, private company shares, crypto, and property outside Canada. It does not catch BC real estate, RRSPs, RRIFs, TFSAs, or pensions. You report the deemed gain on Form T1243, list holdings on Form T1161 if they exceed $25,000 in total fair market value, and can defer the tax with security under Form T1244.

At BC's roughly 53.5% top combined rate, the departure tax on gains taxed at the top bracket works out to about 27 cents per dollar of gain. That is among the highest effective exit rates in the country, which makes the timing of the departure date and any pre-departure loss harvesting more valuable here than in Alberta.

The BC home decision

Because Canadian real estate is excluded from departure tax, many BC retirees plan to keep the house. Three things to know before deciding:

• Rent it and you are into NR6 territory. Without an approved NR6, 25% of gross rent is withheld. With it, withholding is on net rent and you file a Section 216 return annually.
• Leave it empty and BC may tax it. The Speculation and Vacancy Tax applies in designated areas (including Metro Vancouver and the Capital Regional District) to homes that are not a principal residence or long-term rental, with higher rates for foreign owners and untaxed worldwide earners. The federal Underused Housing Tax can also apply to a non-resident, non-citizen owner.
• Sell later and Section 116 applies. As a non-resident seller you need a clearance certificate, or the buyer withholds 25% of the price. The principal residence exemption still shelters the years you lived there, prorated.

For most BC-to-Florida retirees, selling before or in the departure year is cleaner than holding.

Florida's side

Florida has no personal income tax and no estate tax. The costs are sales tax (7% in Miami-Dade, Broward, and Palm Beach, against BC's 12% combined GST and PST, so this line goes down), property tax (higher than BC on a like-for-like home, softened by homestead), and the documentary stamp tax on the purchase deed.

Homestead: own and occupy the home as your permanent residence on January 1, apply by March 1. Up to $50,000 comes off assessed value and annual assessment increases are capped at 3%. For a retiree planning to hold the home for a decade, the cap is worth more than the exemption.

The RRSP and RRIF plan

Your RRSP is not deemed sold on departure and stays tax-deferred in the US under Article XVIII of the treaty. The Florida advantage is that there is no state layer to break the deferral.

For retirees the question is the withdrawal schedule. Canadian withholding is 25% on lump sums but drops to 15% on periodic RRIF payments that stay within the treaty limit (broadly, the greater of twice the required minimum and 10% of the opening balance). The US taxes each withdrawal at ordinary rates with a foreign tax credit for the Canadian withholding. Converting to a RRIF before or shortly after the move and drawing periodically is the usual structure.

CPP and OAS paid to a Florida resident are taxable only in the US under the treaty, and the OAS clawback does not apply because Canada does not tax the benefit.

Worked example

A Victoria couple leaves on August 1 with $400,000 of unrealized gain in a non-registered account, $1.2 million in RRSPs, and a home worth $1.8 million they sell in the departure year.

• Departure tax. $400,000 gain, $200,000 taxable, at about 53.5%: roughly $107,000.
• Home. Sold before departure, sheltered by the principal residence exemption. No Section 116.
• RRSP. No tax on departure. Convert to RRIF, draw periodically, 15% Canadian withholding, US foreign tax credit.
• Florida. No state income tax on any of it.

Official sources

"When you leave Canada, you are considered to have sold certain types of property (even if you have not sold them) at their fair market value (FMV) and to have immediately reacquired them for the same amount. This is called a deemed disposition and you may have to report a capital gain (also known as departure tax)." — Canada Revenue Agency, Leaving Canada (emigrants), https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html

BC's Speculation and Vacancy Tax applies annually to residential property in designated taxable regions, with rates that depend on the owner's residency and tax status. — Government of British Columbia, Speculation and vacancy tax, https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy-tax

"No tax upon estates or inheritances or upon the income of natural persons who are residents or citizens of the state shall be levied by the state, or under its authority." — Florida Constitution, Article VII, Section 5(a), http://www.leg.state.fl.us/statutes/index.cfm?submenu=3#A7S05

Practitioner note

The BC retiree file has one recurring surprise: the client already met the US substantial presence test two winters before the "move." That changes which year is the first US return, which year the FBAR starts, and whether the TFSA has already been taxable in the US. We count days for the prior three years before we do anything else.

Next step

Fairlight prepares the BC departure return, the first-year US return, and ongoing RRIF, CPP, and OAS filings. See cross-border pricing or book a call.