The Year You Move From Canada to the US: Who Taxes What, Month by Month

Short version: Moving From Canada to the U.S.: Your First U.S. Tax Year

Every move-year confusion reduces to one question asked item by item: which country's column does this income belong in? The architecture that answers it: Canada taxes residents on world income and non-residents on Canadian-source income — so the final T1 is a part-year return reporting everything up to the departure date and only Canadian-source items (mostly via withholding, not the return) after. The US taxes residents on world income and nonresidents on US-source income — so the first US filing covers world income from the residency start date (dual status) or, by election, the full year with credits. Between those frames, each item finds its column. Salary follows workdays: Canadian wages to departure are Canada-first; US wages after are US-first; a bonus paid after the move for pre-move work is Canadian-source employment income even though a non-resident receives it — the payor withholds, and the treaty's employment article keeps it Canadian. The deemed disposition stacks the portfolio's accrued gains into the pre-departure column at departure values. Canadian dividends, interest, and RRSP/RRIF payments after departure leave the T1 entirely and become Part XIII withholding items — 15% on dividends, treaty rates on the rest — final taxes handled by the payer, credited on the US return where the US also taxes them. Real Canadian rent enters the section 216 system; a Canadian home sale meets section 116 or the pre-departure exemption. And the year's two returns must agree on the seam: the same departure date, credits computed on the same items, and no income falling into both columns — or neither.

Key takeaways

• Final T1 (part-year): world income January to departure; departure-date deemed dispositions; prorated personal credits (full credits if 90%+ of the year's world income sits in the resident period); emigrant forms attached; provincial tax per the departure province.
• After the departure date, Canada shrinks to source: employment physically performed in Canada, Canadian business income, Canadian real property (rent via 216, sales via 116) stay return-based; passive Canadian payments (dividends, RRSP/RRIF, pensions) become Part XIII withholding — final, no T1 line, the payer's job once you've told every payer you're non-resident. Telling them is your job, and the common miss.
• First US filing: dual status (worldwide from the start date, no standard deduction, no joint return) or the full-year election (whole year worldwide, jointly, with Canadian tax as credits) — modeled, not defaulted.
• Timing levers that respect the seam: pre-move — realize gains headed for sale anyway (the departure tax claims them regardless), collapse the TFSA, consider RRSP contributions against final-year income, receive what can be accelerated; post-move — take what benefits from non-resident treatment (a bonus deferred into non-residency is still Canadian-source, so deferral doesn't move salary's column — but investment income timing genuinely moves columns).
• Credits run item by item, not in bulk: Canadian tax on pre-move salary credits on a full-year-election US return; Part XIII withholding credits against US tax on the same dividends; nothing credits across unrelated items — the move-year returns are a matching exercise.
• The seam must reconcile: one departure date across the T1, the emigrant forms, the US residency start analysis, payroll records, and both countries' credit claims. Two preparers with two dates is the classic move-year failure.

The month-by-month file

The practical tool is a single schedule built as the year runs: every income item, its date, its country column, the withholding applied, and the return it lands on. Payroll stubs bracketing the move, the departure-date brokerage statement, letters to each Canadian payer flagging non-residency (the bank, the fund company, the pension administrator — each one that keeps withholding resident-style creates a cleanup), and the T4/NR4/W-2/1099 stack at year-end reconciled against the schedule. The move year is not conceptually hard; it is bookkeeping-hard, and the schedule is the bookkeeping.

Worked example

A Halifax analyst moves to Boston on September 8: salary C$8,500/month in Canada through August, US$9,500/month from September; a C$15,000 bonus for H1 paid in November; a C$240,000 portfolio (C$40,000 accrued gain); C$6,000 of Canadian dividends spread across the year; an RRSP left in place. Her columns: January–August salary — final T1, world income. September–December US salary — US return (and, if she elects full-year treatment, it's there alongside the Canadian items with credits). November bonus — Canadian-source employment income for pre-departure work: her Canadian employer withholds non-resident-style, it lands on the Canadian side, and the US (full-year election) includes it with a credit. Deemed disposition — C$40,000 gain on the final T1 at September 8 values; the US basis election adopts those values. Dividends — the pre-September portion on the T1; the post-September payments switch to 15% Part XIII withholding once she notifies the transfer agent (she does it in September; the October payment that slipped through resident-style gets trued up). RRSP — untouched, exempt, one FBAR line ahead. Her returns: a part-year T1 with T1161/T1243 and near-full personal credits (the 90% test — most of her year's income was resident-period), and a joint full-year-election 1040 with her spouse, credits matched item by item off the schedule she kept — a move year that closes in one sitting because every dollar already knew its column.

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

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

Practitioner note

Move years are ledgers pretending to be tax problems: the rules assigning each item a column are settled, and every dispute we untangle traces to a seam nobody reconciled — two dates, a payer never notified, a bonus booked to the wrong country. The deliverable that prevents all of it is the one-page item schedule started before the move, and the habit that fills it is asking, for every dollar that arrives all year: which column, and who withheld.

See also: Browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the move-year engagement — the item-by-item column schedule, payer notifications, both part-year returns prepared as one project, and the credit matching across the seam. See cross-border pricing or book a call.