Your First US Tax Return After Moving From Canada: Dual-Status, the Full-Year Election, and Which One Saves Money

Short version: Dual-Status Return Explained: The Year You Move

The year you move, the US has to decide what you were — and it lets you participate in the decision. The default for someone who becomes a US resident mid-year (green card, or substantial presence with a residency starting date) is dual status: nonresident from January 1 to the residency start date (taxed by the US only on US-source income, usually nothing for an arriving Canadian), resident from that date onward (taxed on worldwide income). Dual status sounds clean and files awkwardly: no standard deduction, no joint return, restricted credits — a 1040 with a 1040-NR statement attached and a rulebook of its own. The alternatives are elections. First-year and full-year residency elections — including the section 6013(g)/(h) elections available to a couple where at least one spouse is a resident by year-end — let the couple file a joint, full-year resident return with the standard deduction and every ordinary benefit, at the price of reporting worldwide income for the entire year, including the Canadian salary earned before the move, with foreign tax credits for the Canadian tax on it. The choice is arithmetic: heavy pre-move Canadian income at high Canadian rates usually makes the full-year election cheap (the credits absorb the US tax) and the joint-filing benefits decisive; a spouse with income Canada taxed lightly, or big pre-move capital gains, can flip it. Layered on top: the departure-side coordination (the treaty basis election for the deemed disposition), the reporting forms that begin (FBAR from the first resident year per its rules, Form 8938), and the state return, which runs its own part-year logic indifferent to the federal election.

Key takeaways

• Residency start date: the first day present in the US during the year of meeting substantial presence (with a de minimis lookback rule for short earlier visits), or the green-card admission date — the earlier of the two governs. TN and H-1B holders reach residency through day counting like anyone else.
• Dual status (the default): US-source-only taxation for the nonresident stub, worldwide after; itemized deductions only, no joint return, no head-of-household. Right answer mainly when pre-move income was large and lightly taxed by Canada, or a one-earner year makes joint filing worthless.
• Full-year election(s): married couples can elect full-year resident treatment and file jointly — standard deduction, joint brackets, credits restored — reporting the whole year's worldwide income with foreign tax credits for Canadian tax. Usually wins for dual-income couples whose pre-move earnings bore full Canadian rates.
• Run both: this is a compute-twice decision, not a rule of thumb. The credits, the deduction, the brackets, and any pre-move gains interact; an hour of modeling routinely moves four figures.
• The forms that start now: FBAR (Canadian accounts kept), Form 8938, Form 8621 for any Canadian funds that survived the move (they shouldn't have), and the treaty basis election aligning US cost with the Canadian deemed-disposition values.
• The state return doesn't follow the federal election: part-year state residency runs on its own dates and rules; a full-year federal election does not hand the state your Canadian salary — check the state's conformity before assuming either way.

Coordinating with the Canadian side

The Canadian final return and the first US return are one project with two filings. The Canadian departure date and the US residency start date should reconcile (a gap or overlap is possible and sometimes real — but it should be explained, not accidental); income in any overlap window needs a treaty answer; Canadian tax on pre-move income becomes the credit that powers the full-year election; and the deemed-disposition values flow into the US basis election. Preparing the two returns in different offices that never speak is how the same dollar gets taxed twice by accident.

Worked example

A couple moves from Ottawa to Denver on August 1. She earned C$110,000 in Canada pre-move (about C$30,000 Canadian tax) and US$55,000 in Colorado after; he earned C$40,000 pre-move and nothing after. Dual-status version: separate returns, no standard deduction, US tax on post-arrival income only — federal tax about US$5,600 between them. Full-year joint election: worldwide income for the year on one joint return; the Canadian salaries add income but their Canadian tax arrives as foreign tax credits that fully absorb the US tax on them; the joint standard deduction and brackets apply to the Colorado wages — federal tax about US$3,900. The election wins by US$1,700, plus a simpler return. Colorado files part-year either way, taxing the US$55,000. Their first-year package: the joint 1040 with the election statement, Form 1116s, FBAR and 8938 for the kept Canadian accounts, the treaty basis election tied to her T1243 values — and one preparer's cover memo reconciling the August 1 story across every document.

Official sources

The IRS explains that a dual-status alien is a person who is both a resident alien and a nonresident alien in the same tax year, typically in the year of arrival or departure, and describes the restrictions that apply to a dual-status return, including that the standard deduction is not allowed. — Internal Revenue Service, Taxation of Dual-Status Aliens, https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens

"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

Arrival-year returns are the one time the US code offers a menu, and the only wrong answer is not pricing both meals: we compute dual-status and the full-year election side by side for every arriving couple, and the winner flips more often than any heuristic predicts. The quiet essential is coordination — the Canadian final return manufactures the credits and the basis values the US return consumes, so the two filings are drafted together or they're drafted wrong.

See also: For whether a TN visa makes you a US tax resident, see whether a TN visa makes you a US tax resident; and browse every cross-border tax topic guide, organized by situation · Short version: Your First US Tax Return After Moving From Canada: The Twelve Items That Make It Different From Every Return After.

Next step

Fairlight prepares the arrival-year filing package — dual-status versus full-year election modeling, the joint election statements, credit computations, basis election, and the Canada-US reconciliation memo. See cross-border pricing or book a call.