Moving from Canada to Colorado: A Flat 4.4%, TABOR Refunds, and Low Property Tax

Colorado's Front Range has become a tech, aerospace, energy, and outdoor-industry corridor, and Denver, Boulder, and Colorado Springs recruit Canadians from every province. The tax picture is simple and moderate: a flat 4.4% state income tax that TABOR can temporarily lower in surplus years, no percentage-based city income tax, and property tax among the lowest in the US. The Canadian side carries the departure tax.

Key takeaways

• Colorado's flat 4.4% income tax; TABOR surplus years can temporarily reduce the rate and trigger refunds.
• Denver's Occupational Privilege Tax is a flat few dollars a month, not a percentage.
• Sales tax runs 8.81% in Denver, lower in most suburbs.
• Property tax is among the lowest in the US, near 0.5% effective.
• No estate tax. Colorado subtracts up to $24,000 of pension income for taxpayers 65 and older.

The Canadian departure

Departure tax applies to non-registered investments, private company shares, crypto, and foreign property at fair market value on the day you leave. Canadian real estate, RRSPs, TFSAs, and pensions are excluded. Report on Form T1243, list holdings on Form T1161 if the total exceeds $25,000, and post security under Form T1244 to defer tax on illiquid assets. The rate is your province's: on a $300,000 unrealized gain, roughly $72,000 from Alberta and $80,000 from Ontario, Quebec, or BC. Provincial health coverage ends around your departure date; confirm the exact date with your plan and arrange US coverage to start the same month.

US federal side

Dual-status return in the arrival year, FBAR on Canadian accounts above $10,000 aggregate, Form 8938 above thresholds, and the RRSP treaty deferral federally. The TFSA loses its tax-free status the day you become a US person; close it before crossing. Equity compensation vesting after the move is split by working days between Canada and the US.

Colorado's side

Flat 4.4% state income tax, temporarily lower in TABOR surplus years; Denver's Occupational Privilege Tax is a flat monthly amount; sales tax 8.81% in Denver, 8.2% in Colorado Springs, about 9% in Boulder; property tax near 0.5% effective; no estate tax. Colorado starts from federal taxable income and subtracts up to $24,000 of pension and annuity income for taxpayers 65 and older ($20,000 from 55 to 64), which covers RRIF, CPP, and Canadian pension income.

The RRSP

Federally deferred under Article XVIII of the treaty and deferred for Colorado because the state starts from federal taxable income. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, a US foreign tax credit federally, and Colorado's flat rate after the pension subtraction.

Who makes this move

Canadian software engineers to Denver and Boulder's tech employers, Alberta oil and gas professionals to Denver's energy companies, Canadian aerospace engineers to Colorado Springs and Denver's space companies, and Canadian outdoor-industry professionals to Colorado's recreation brands.

Worked example

A Toronto software engineer moves to Boulder on May 31 with $220,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, RSUs vesting after the move, and a Toronto condo sold in the departure year.

• Departure tax. $220,000 gain, $110,000 taxable, at about 53.5%: roughly $59,000.
• Condo. Sold as a resident under the principal residence exemption.
• RSUs. Vests split by working days; Colorado taxes its share at 4.4%.
• RRSP. No tax on departure; federal and Colorado deferral.
• Boulder. Combined top rate about 41.4%. HST 13% becomes sales tax 9%. Property tax on an $850,000 home around $4,500.

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 subtraction is generally limited to $20,000 each year or, for individuals age 65 or older, $24,000. — Colorado Department of Revenue, Social Security, Pensions and Annuities, https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities

"You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least: 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that." — Internal Revenue Service, Substantial Presence Test, https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

Practitioner note

Colorado's pension subtraction is one of the more generous in the US and covers a Canadian pension, CPP, and RRIF income once the client reaches 55. We time the pension start against the age threshold so the full subtraction is available.

Corridor guides

• Calgary to Denver: Two Flat-Tax Systems, TABOR, and the Energy Corridor
• Montreal to Denver: Three Authorities on the Way Out, a Flat 4.4% on the Way In
• Ottawa to Denver: Defence Tech, the Rockies, and Colorado's Flat 4.4%
• Toronto to Denver: The Outdoor-Tech Corridor and Colorado's Flat 4.4%
• Vancouver to Denver: Tech, the Outdoor Corridor, and Colorado's Flat 4.4%

See also: Weighing Florida instead? See the Canada-to-Florida guide. Browse every corridor by city, province, and state.

Next step

Fairlight prepares the Canadian departure return, the first-year federal and state returns, and ongoing cross-border filings. See cross-border pricing or book a call.