Montreal to Seattle: AI, the Departure Tax, and the Capital Gains Excise

Montreal's AI labs feed Seattle's AI companies and cloud giants directly, and the rate drop on salary is large: Quebec's combined top rate of about 53.3% becomes a federal-only 37%. Equity is the exception: Washington's capital gains excise applies to large stock sales. 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.
• Washington has no income tax on wages or ordinary investment income.
• Washington taxes long-term capital gains above roughly $270,000 a year at 7%, plus 2.9% above $1 million.
• Quebec's 14.975% combined GST and QST becomes about 10.35% sales tax in Seattle. 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.

Seattle's side

No state income tax on wages or ordinary investment income; a 7% excise on long-term capital gains above roughly $270,000 a year (indexed), plus 2.9% on gains above $1 million, with exemptions for real estate and retirement accounts but not stock or RSU sales; sales tax about 10.35% in Seattle; B&O gross receipts tax on businesses and consultants; property tax near 1% in King County; estate tax with an exemption near $3 million and rates to 35%.

The RRSP in Washington

Untouched on departure, federally deferred under the treaty, no state income tax to break the deferral, and exempt from the capital gains excise as a retirement account. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit.

RSUs and the excise

Vests are ordinary income, split between Canada and the US by working days, and not subject to the excise. Sales of vested shares are capital transactions: a large sale in one year can cross the threshold and trigger the 7%. Sell in tranches, or realize gains in Canada before departure.

Who makes this move

Montreal AI researchers and engineers to Amazon, Microsoft, and Seattle's AI startups, Quebec aerospace engineers to Boeing, and Montreal game developers to Seattle-area studios.

Worked example

A Montreal machine learning engineer moves to Seattle on April 30 with $200,000 of unrealized gain in a non-registered account, $120,000 of vested employer shares with a $30,000 cost base, $350,000 in an RRSP, and a Rosemont condo sold in the departure year.

• Departure tax. $200,000 plus $90,000 of gains, $145,000 taxable, at about 53.3%: roughly $77,000 across the T1 and TP-1.
• Condo. Sold as a resident under the principal residence exemption on both returns.
• RRSP. No tax on departure; exempt from the excise.
• Post-move share sales. Gains above the threshold face the 7% excise. Sell in tranches.
• Seattle. No state income tax. Sales tax 14.975% becomes 10.35%.

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/

Washington's capital gains tax is "a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets." — Washington State Department of Revenue, Capital gains tax, https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax

Practitioner note

Quebec-to-Seattle files combine the two things that go wrong most often: a TP-1 filed without a departure date, and a large post-move stock sale that crosses Washington's threshold. Both are avoidable with a date and a sale schedule set before the move.

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 equity timing plan, and the first-year US return for Seattle-area clients. See cross-border pricing or book a call.