Calgary to Phoenix: Energy to Aerospace, the RRSP, and Arizona's Flat 2.5%

Phoenix has become an aerospace, semiconductor, and financial back-office city, and its employers recruit Calgary's engineers and finance professionals. Calgary retirees choose it too. The tax picture is a clean cut: Alberta's combined top rate of about 48% becomes about 39.5% in Arizona, with the lowest flat rate of any state that taxes income and no city income tax.

Key takeaways

• Alberta's roughly 48% top rate sets the departure tax. On a $300,000 unrealized gain, about $72,000.
• Arizona's flat 2.5%; no city income tax anywhere in the state.
• Arizona follows the treaty's RRSP deferral.
• Alberta's 5% GST becomes about 8.6% sales tax in Phoenix.
• Arizona property tax is among the lowest in the US. No estate tax.

The Alberta departure

Departure tax applies to non-registered investments, private company shares, crypto, and foreign property at fair market value on the departure date. Alberta 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. A Calgary corporation is deemed sold, loses CCPC status, and becomes a US controlled foreign corporation after the move; wind it up before you go. AHCIP ends on permanent departure.

Phoenix's side

Arizona's flat 2.5% state income tax, the lowest flat rate of any state that taxes income; no city income tax anywhere in Arizona; sales tax about 8.6% in Phoenix and 7.8% to 8.3% in Scottsdale and the East Valley; property tax among the lowest in the US, near 0.6% effective; no estate tax.

The RRSP in Arizona

Federally deferred under Article XVIII of the treaty and deferred for Arizona because the state starts from federal AGI. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, a US foreign tax credit federally, and Arizona's 2.5%.

Who makes this move

Calgary engineers to Honeywell, Boeing Mesa, and the Phoenix aerospace cluster, Alberta process engineers to the semiconductor fabs in Chandler and north Phoenix, Calgary finance staff to the banks' Phoenix back offices, and Alberta retirees to Scottsdale and the East Valley.

Worked example

A Calgary aerospace engineer moves to Mesa on June 30 with $200,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, and a Calgary home sold in the departure year.

• Departure tax. $200,000 gain, $100,000 taxable, at about 48%: roughly $48,000.
• Home. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; federal and Arizona deferral.
• Mesa. Combined top rate about 39.5%. GST 5% becomes sales tax 8.3%. Property tax on a $600,000 home around $3,600.

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

New Tax Rate of 2.5% for All Income Levels and Filing Status. — Arizona Department of Revenue, Individual Income Tax Highlights, https://azdor.gov/forms/individual-income-tax-highlights

Alberta's top personal income tax bracket: "15%" on "$362,961.01 and up" (2025). — Government of Alberta, Personal income tax, https://www.alberta.ca/personal-income-tax

Practitioner note

Calgary retirees moving to Arizona often met the substantial presence test during earlier winters in Scottsdale. We count days for the prior three years before we set the departure date.

See also: Weighing Florida instead? See the Canada-to-Florida guide, or the same city's Calgary to Miami guide.

Next step

Fairlight prepares the Alberta departure return, the three-year day count, and the first-year federal and Arizona returns for Phoenix clients. See cross-border pricing or book a call.