Cross-Border Tax Help for Toronto Residents Moving to the US: The Surtax, the House, and the Snowbird Clock

Toronto sends more people to the US than any Canadian city, through Bay Street's finance corridor, the tech sector, the hospitals and universities, and the largest snowbird pipeline in the country. The files share Ontario's rate structure (a top combined rate of about 53.5% with a two-tier provincial surtax), a housing market where the home is usually the largest asset, and a set of Toronto-specific taxes on real estate. Fairlight works with Toronto clients remotely from Miami, as most cross-border firms do; here is what the work involves.

Key takeaways

• Ontario's combined top rate of about 53.5%, including the provincial surtax, sets the departure tax. On a $300,000 unrealized gain, roughly $80,000. The surtax ends on departure.
• The Toronto home is excluded from departure tax but brings NR6 and Section 216 if rented, Section 116 on a later sale, and Toronto's Vacant Home Tax if left empty.
• OHIP ends on permanent departure.
• Toronto snowbirds usually meet the US substantial presence test before the move; the first US tax year, the FBAR start, and the TFSA exposure are often earlier than the client thinks.
• Bay Street compensation carries deferred bonuses and restricted units that are split by working days between Canada and the US for years after the move.

What a Toronto file looks like

The portfolio and the surtax. Non-registered investments, private company shares, crypto, and foreign property are deemed sold at fair market value on the departure date, taxed at Ontario's roughly 53.5% top rate on half the gain. Ontario's surtax makes pre-departure loss harvesting and the choice of departure month worth more here than in Alberta. Unused capital loss carryforwards should be applied in the departure year.

The house. Three paths: sell under the principal residence exemption; rent it under NR6 (filed before the first rent payment) and Section 216, with Section 116 clearance on a later sale; or leave it empty and face Toronto's Vacant Home Tax on properties unoccupied more than six months and the federal Underused Housing Tax. Selling in the departure year is cleanest; renting is workable; empty is expensive.

Deferred compensation. Bay Street bonuses, restricted units, and options vest over years. Under the treaty, employment income is sourced by where the work was performed; vests after the move are split by working days over the vesting period, and both payroll systems may withhold on the full amount. The over-withholding is recoverable on the first-year returns with a working-day schedule.

The corporation. Toronto's professional corporations (physicians, dentists, lawyers, consultants) are deemed sold on departure, lose CCPC status, and become US controlled foreign corporations. Wind up before departure.

The snowbird clock. A Toronto retiree who has wintered in Florida for years may have met the substantial presence test before the move. The three-year day count decides the first US tax year, the FBAR start, and whether the TFSA has already been taxable in the US.

What to expect from a cross-border preparer

• Both returns from one office: the departure-year T1 with the T1243 and T1161, and the first-year US return with the Article XIII(7) basis election, FBAR, and Form 8938.
• The three-year day count before anything else on a snowbird file.
• The house decision modelled three ways before the departure date.
• A destination-state review: Florida's homestead calendar, New York's residency audits and estate cliff, California's annual RRSP inclusion, Texas property tax.
• Ongoing filings: Section 216 if the house is rented, NR4 reporting on RRSP and RRIF withdrawals, Section 116 on a later sale, and the annual US return.

Where Torontonians go

Miami, Fort Lauderdale, and Palm Beach for retirement and finance; New York for Bay Street careers; the Bay Area, Seattle, and Austin for tech; Charlotte, Chicago, and Dallas for corporate roles; Boston for biotech. Fairlight's corridor guides cover each Toronto-to-city pair.

Worked example

A Toronto portfolio manager with $300,000 of unrealized gain in a non-registered account, $700,000 in an RRSP, deferred compensation vesting over three years, and a Riverdale house moves to Miami on June 30.

• Departure tax. $300,000 gain, $150,000 taxable, at about 53.5%: roughly $80,000, reduced by pre-departure loss harvesting.
• House. Sold in the departure year under the principal residence exemption. No Section 116, no Vacant Home Tax.
• Deferred comp. Working-day schedule built before the first post-move vest; both payrolls' over-withholding recovered on the first-year returns.
• RRSP. No tax on departure; federal deferral; no Florida layer.
• US. Dual-status first return; XIII(7) election; FBAR and Form 8938; Florida homestead applied for in January.

Official sources

"Personal income tax is collected annually from Ontario residents and those who earned income in the province. The tax is calculated separately from federal income tax. There are 5 Ontario income tax brackets and 5 corresponding tax rates." — Government of Ontario, Personal Income Tax Rates and Credits, https://data.ontario.ca/dataset/personal-income-tax-rates-and-credits

"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

Practitioner note

Toronto files come in two shapes. The working professional with a firm departure date needs the corporate and equity work done before the date. The snowbird retiree needs a three-year day count done before anything else, because the answer often moves the first US tax year backward and changes which forms were already late. Both are fixable; both are cheaper early.

See also: Planning the move? Start with the Canada-to-US tax checklist and browse every corridor by city, province, and state.

Next step

Fairlight prepares the Ontario departure return, the house and equity planning, the first-year US return, and ongoing cross-border filings for Toronto clients moving to the US. See cross-border pricing or book a call.