Montreal to San Francisco: AI, the RRSP, and the Three-Authority Departure

Montreal's AI labs feed the Bay Area's AI companies directly, and the move is a small rate cut with large complexity: Quebec's combined top rate of about 53.3% becomes about 50.3% in California, the RRSP acquires an annual California cost, RSUs are sourced three ways, and 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 8.625% sales tax in San Francisco. 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 Francisco'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; 8.625% sales tax in San Francisco, 9.125% to 9.375% on the Peninsula and in the South Bay; 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.

RSUs and California sourcing

RSUs granted in Canada that vest after the move are split between Canada and the US by working days over the vesting period, and California sources its share by California working days as well. Both payrolls may withhold on the full amount. Because California taxes the gain on a later sale at ordinary rates, the decision to hold or sell vested shares is a California decision as much as a federal one.

Who makes this move

Montreal AI researchers and engineers to the Bay Area's AI companies and labs, Quebec software developers to San Francisco's technology companies, Montreal founders relocating startups to the Bay Area, and Quebec finance professionals to the Bay Area's venture firms.

Worked example

A Montreal machine learning engineer moves to San Francisco on July 1 with $200,000 of unrealized gain in a non-registered account, $350,000 in an RRSP producing about $10,000 a year of income, RSUs vesting after the move, startup shares deferred under T1244, and a Plateau condo 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; startup shares deemed sold with tax deferred under T1244.
• RRSP. Federally deferred. California taxes the $10,000 annual income; restructuring reduces it.
• RSUs. Split by working days between Canada, US federal, and California.
• Condo. Sold as a resident under the principal residence exemption on both returns.
• San Francisco. Combined top rate about 50.3%. Sales tax 14.975% becomes 8.625%.

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 AI movers often hold shares in a Quebec startup without a liquidity event. Those shares are deemed sold on departure, the valuation is the whole file, and California will tax the eventual gain at ordinary rates. We get a defensible valuation, file T1244, and make the Article XIII(7) election on the first US return so the federal basis steps up to the departure-date value.

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 T1244 deferral, the RRSP restructuring, and the first-year federal and California returns for Bay Area clients. See cross-border pricing or book a call.