BC to Washington State: No Income Tax Next Door, but a Capital Gains Excise That Still Bites

BC to Washington is the shortest cross-border move on the West Coast, and the two tax systems are mirror images: BC has a high income tax (combined top rate about 53.5%) and taxes half of capital gains; Washington has no income tax and a 7% excise on large capital gains. On salary the move is a large cut. On equity it is not, and for a Vancouver tech worker with a concentrated RSU position the Washington excise can exceed what BC would have charged on the same gain.

Key takeaways

• BC's roughly 53.5% top rate sets the departure tax. On a $300,000 unrealized gain, about $80,000.
• Washington has no income tax on wages or ordinary investment income.
• Washington taxes long-term capital gains above an annual standard deduction ($278,000 for 2025) at 7%, plus 2.9% above $1 million. Real estate and retirement accounts are exempt; stock, RSU, and crypto sales are not.
• BC's 12% combined GST and PST becomes about 10.35% sales tax in Seattle.
• Washington's estate tax exemption is about $3 million. MSP ends on permanent departure.

The BC departure

Departure tax applies to non-registered investments, private company shares, crypto, and foreign property at fair market value on the departure date. BC real estate, RRSPs, TFSAs, and pensions are excluded. Report on Form T1243, list holdings on Form T1161 if the total exceeds $25,000, and post security under Form T1244 for illiquid assets.

The interaction with Washington's excise drives the timing. A gain realized before departure is taxed once in BC at half inclusion and 53.5%, an effective 27%. The same gain realized as a Washington resident is taxed federally at up to 20% plus the 3.8% net investment income tax and, above the threshold, by Washington at 7% to 9.9%. The federal Article XIII(7) election steps up basis to the departure-date value; Washington's excise has no equivalent.

The Vancouver home is excluded from departure tax, but kept empty it invites BC's Speculation and Vacancy Tax, Vancouver's Empty Homes Tax, and the federal Underused Housing Tax. Rent it under NR6 and Section 216, or sell in the departure year.

Washington's side

No income tax; capital gains excise as above; sales tax about 10.35% in Seattle and 8.7% in Vancouver, Washington; B&O gross receipts tax on businesses and consultants; property tax near 1% in King County; estate tax with an exemption near $3 million and rates to 35%.

The RRSP

Untouched on departure, federally deferred under the treaty, no state income tax to break the deferral, and exempt from the excise as a retirement account. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit.

RSUs and the excise

Vests are ordinary income, split between Canada and the US by working days, and not subject to the excise. Sales of vested shares are capital transactions; a large single-year sale can cross the threshold. Sell in tranches, or realize gains in BC before departure.

The commuter and the day count

Vancouver-to-Seattle commuters who do not move are a different file: days you return home the same day do not count toward the substantial presence test if you commute on more than 75% of workdays. Vancouver tech workers who spend months in Seattle before the formal move may have met the test early; count the prior three years.

Worked example

A Vancouver software engineer moves to Seattle on April 30 with $300,000 of unrealized gain in a non-registered account, $200,000 of vested employer shares with a $50,000 cost base, $400,000 in an RRSP, and a Vancouver condo sold in the departure year.

• Departure tax. $300,000 plus $150,000 of gains, $225,000 taxable, at about 53.5%: roughly $120,000.
• Condo. Sold as a resident under the principal residence exemption. No vacancy taxes.
• RRSP. No tax on departure; exempt from the excise.
• Post-move share sales. Gains above the threshold face the 7% excise. Sell in tranches.
• Seattle. No state income tax. Sales tax 12% becomes 10.35%.

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

"7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets. [...] The standard deduction for 2025 is $278,000." — Washington State Department of Revenue, Capital gains tax, https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax

"The speculation and vacancy tax is an annual tax based on how owners use residential properties in areas in B.C. affected most by the current housing shortage crisis." — Government of British Columbia, Speculation and vacancy tax, https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy-tax

"You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least: 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that." — Internal Revenue Service, Substantial Presence Test, https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

Practitioner note

BC-to-Washington is a two-line file: salary, which is a clean cut, and equity, which is not. We map the RSU sale schedule against Washington's annual threshold before the move, and where the gain is already large we look at realizing it in BC.

See also: Vancouver to Seattle: RSUs, the Tech Corridor, and Two Different Tax Systems. Browse every corridor by city, province, and state.

Next step

Fairlight prepares the BC departure return, the equity timing plan, the property decision, and the first-year US return for Washington clients. See cross-border pricing or book a call.