Montreal to San Diego: Biotech, Defence Pay, and Three Authorities on Departure

San Diego's biotech cluster and its defence contractors recruit Montreal's life sciences researchers and aerospace engineers. The move is a small rate cut: Quebec's combined top rate of about 53.3% becomes about 50.3% in California, with the RRSP taxed annually. 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.
• California's combined top rate is about 50.3%; capital gains at ordinary rates.
• California does not follow the treaty on RRSPs.
• Quebec's 14.975% combined GST and QST becomes 7.75% 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.

San Diego's side

Graduated California state rates to 12.3% plus a 1% surcharge above $1 million, for a combined federal and state top rate near 50.3%; capital gains taxed as ordinary income; 7.75% sales tax in the City of San Diego, among the lowest in California; Proposition 13 property tax at about 1.1% of purchase price with a 2% annual cap; no estate tax; aggressive residency audits; community property.

The RRSP in California

Federally deferred under Article XVIII of the treaty. California does not conform: the Franchise Tax Board taxes the interest, dividends, and realized gains inside the account each year. Before departure, restructure toward growth assets that produce little annual income, draw the account down while still a Canadian resident, or accept the annual inclusion and track California basis.

Who makes this move

Montreal biotech researchers to the Torrey Pines cluster and San Diego's pharma companies, Quebec aerospace engineers to General Atomics, Northrop Grumman, and the defence contractors, Montreal AI and software talent to Qualcomm and San Diego's tech employers, and Quebec clinicians to UC San Diego Health.

Worked example

A Montreal biotech scientist moves to San Diego on July 31 with $180,000 of unrealized gain in a non-registered account, $350,000 in an RRSP producing about $10,000 a year of income, and an Outremont condo sold in the departure year.

• Departure tax. $180,000 gain, $90,000 taxable, at about 53.3%: roughly $48,000 across the T1 and TP-1. Cheaper than California's ordinary-rate treatment later.
• RRSP. Federally deferred. California taxes the $10,000 annual income; restructuring reduces it.
• Condo. Sold as a resident under the principal residence exemption on both returns.
• San Diego. Combined top rate about 50.3%. Sales tax 14.975% becomes 7.75%.

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/

California does not conform to federal tax treaty provisions; income excluded from federal income under a treaty may be taxable by California. — California Franchise Tax Board, Publication 1031, Guidelines for Determining Resident Status, https://www.ftb.ca.gov/forms/2025/2025-1031-publication.pdf

Practitioner note

Montreal-to-San Diego is a three-authority departure into the one state that taxes the RRSP annually. The RRSP restructuring has to happen before the departure date, and the TP-1 has to carry that date.

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, the RRSP restructuring, and the first-year federal and California returns for San Diego clients. See cross-border pricing or book a call.