Montreal to Detroit: Aerospace, the Auto Corridor, and Three Authorities on the Way Out

Montreal's aerospace engineers and AI researchers have a direct market in Detroit's autonomous vehicle and EV programs. The move is a large tax cut: Quebec's combined top rate of about 53.3% becomes about 41.25% in most of Michigan. The departure year runs through Revenu Québec, the CRA, and the IRS.

Key takeaways

• Two Canadian departure returns: the federal T1 and Revenu Québec's TP-1, with matching departure dates.
• Quebec's roughly 53.3% top rate sets the departure tax. On a $300,000 unrealized gain, about $80,000.
• Michigan's flat 4.25% plus Detroit's 2.4% city tax; most suburbs have no city tax.
• Michigan follows the treaty's RRSP deferral.
• Quebec's 14.975% combined GST and QST becomes 6% sales tax. RAMQ ends on departure.

The three-authority departure

The federal deemed disposition applies to non-registered investments, private company shares, crypto, and property outside Canada; Quebec mirrors it. Report on federal Form T1243 (with T1161 if the property list exceeds $25,000) and on the Quebec equivalents. RAMQ ends when you leave Quebec to settle outside Canada. A Montreal condo kept and rented brings NR6 and Section 216 federally plus Quebec equivalents.

Detroit's side

Michigan's flat 4.25% state income tax; Detroit's 2.4% city income tax on residents (1.2% on non-residents who work in the city), with most suburbs (Troy, Novi, Birmingham, Ann Arbor) charging none; 6% sales tax with no local additions; property tax among the higher effective rates in the US, softened by the Principal Residence Exemption and a taxable-value growth cap; no estate tax.

The RRSP in Michigan

Federally deferred under Article XVIII of the treaty and deferred for Michigan 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 Michigan's 4.25%. Michigan phases in a retirement income deduction by birth year that can cover RRIF income.

Who makes this move

Montreal aerospace engineers to the Detroit automakers and suppliers, Quebec AI and robotics talent to the autonomous vehicle programs, Montreal software developers to the automakers' technology groups, and Quebec manufacturing staff to the EV and battery plants.

Worked example

A Montreal aerospace engineer moves to Troy on July 31 with $200,000 of unrealized gain in a non-registered account, $400,000 in an RRSP, and a Laval home sold in the departure year.

• Departure tax. $200,000 gain, $100,000 taxable, at about 53.3%: roughly $53,000 across the T1 and TP-1.
• Home. Sold as a resident under the principal residence exemption on both returns.
• RRSP. No tax on departure; federal and Michigan deferral.
• Troy. Salary taxed at 4.25% state; no city tax. Sales tax 14.975% becomes 6%.

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

Revenu Québec sets out the income tax obligations of individuals who cease to be resident in Québec, including the deemed disposition of property on departure. — Revenu Québec, Leaving Québec, https://www.revenuquebec.ca/en/citizens/your-situation/residence-status-and-tax-obligations/leaving-quebec/

Michigan's individual income tax rate and the list of cities that impose a city income tax are published by the Michigan Department of Treasury. — Michigan Department of Treasury, City Income Tax, https://www.michigan.gov/taxes/citytax

Practitioner note

Quebec-to-Detroit files are straightforward on the US side and detailed on the Canadian side. The TP-1 must carry the same departure date as the T1, and a rented Montreal condo needs Quebec rental filings alongside the federal NR6 and Section 216.

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

Next step

Fairlight prepares the T1, the TP-1, and the first-year federal, Michigan, and city returns for Detroit-area clients. See cross-border pricing or book a call.