Moving from Canada to Florida: What Actually Changes on Your Taxes

Short version: What Taxes Do Florida Residents Pay? · Why Canadians Choose Florida: State Tax Compared

Florida is the destination Canadians ask us about most, and for a simple reason: it is the only large, warm-weather state with no personal income tax, no state estate tax, and a Canadian community big enough that your dentist may also be from Mississauga. What most people get wrong is where the tax bill sits. Florida's side of the move is almost free. Canada's side is where the money is, and the timing of a handful of decisions in the departure year decides how much.

Key takeaways

• Florida levies no personal income tax, so there is no state layer on your salary, your RRSP withdrawals, or your capital gains. Your US tax is federal only.
• Canada's departure tax is the largest single cost of the move. It is a deemed sale of most non-registered assets at fair market value on the day you leave.
• Your RRSP is not deemed sold. It stays tax-deferred in the US under the treaty, and Florida adds nothing on top, which is not true in California or New York.
• The IRS decides your US residency by counting days. Many Canadians become US tax residents earlier than their move date suggests.
• Florida homestead runs on a January 1 / March 1 calendar. Get the dates wrong and you wait a full year for the exemption and the assessment cap.

Step one: the Canadian departure year

When you stop being a Canadian tax resident, the CRA treats you as having sold most of your capital property the day you leave. Non-registered stocks, ETFs, mutual funds, crypto, shares of a private company, and foreign real estate are all caught. Canadian real estate is not (it stays taxable in Canada when you eventually sell), and neither are RRSPs, RRIFs, TFSAs, RESPs, or pension plans.

You report the deemed gain on Form T1243. If the fair market value of everything you own on the way out exceeds $25,000, you also list your property on Form T1161, and the T1161 has its own penalty even when no tax is owed. The tax itself can be deferred by posting security under Form T1244, which is worth doing when the gain is large and the assets are illiquid.

A worked number. Suppose you leave Ontario with $300,000 of unrealized gain in a brokerage account. Half of that gain is taxable. At Ontario's top combined marginal rate of roughly 53.5%, the departure tax on that account is about $80,000, due with your final Canadian return by April 30 of the following year. The same $300,000 gain leaving Alberta costs about $72,000 at Alberta's 48% top rate. Florida's share of that gain, for as long as you live there, is zero.

The other departure-year items:

• Final T1. You file a Canadian return for the departure year with a departure date on page one. Income up to that date is taxed as a resident; income after it is taxed only if it is Canadian-source.
• TFSA. No departure tax, but the account loses its tax-free character the day you become a US person, and the IRS may treat it as a foreign trust. Most clients drain it before they cross.
• Principal residence. If you keep your Canadian home and rent it, 25% of gross rent is withheld unless you file an NR6 and a Section 216 return. When you sell as a non-resident, Section 116 clearance applies.
• Provincial health coverage. Every province ends coverage around your departure date. The mechanics differ by province, and the coverage gap before your US plan starts is a real cost to budget.

Step two: when the US starts counting you

Your US residency does not begin on the day you sign a Florida lease. The IRS applies the substantial presence test, a weighted three-year day count, and the treaty tie-breaker only matters if both countries claim you. A snowbird who has spent four months a year in Florida for three winters has probably already crossed the line before the "official" move.

In the year you arrive, you generally file a dual-status return: non-resident for the part of the year before residency began, resident after. That first return is where the RRSP treaty position, the FBAR on your remaining Canadian accounts, and Form 8938 all start.

Step three: what Florida does and does not tax

Florida's constitution prohibits a state income tax on individuals. There is no state estate tax and no inheritance tax. What Florida does charge is worth knowing before you buy:

• Sales tax. 6% state rate, plus a county surtax. Miami-Dade, Broward, and Palm Beach are each at 7% total.
• Property tax. Set by county and municipality. For a newly purchased home in South Florida, budget an effective rate in the high 1% range of purchase price until homestead and the assessment cap kick in.
• Documentary stamp tax. 0.7% of the purchase price on the deed statewide (0.6% in Miami-Dade for single-family homes), normally paid by the seller but negotiable.
• Homestead exemption. Reduces the assessed value of your permanent residence by up to $50,000 and, more valuable over time, caps annual assessment increases at 3%. You must own and occupy the home as your permanent residence on January 1 and apply by March 1.

That last point drives the timeline. Close on a home in November, move in, and apply for homestead in January: you get it for that year. Close in February and you wait until the following January 1 to qualify.

The RRSP, and why Florida is the easy case

Under Article XVIII of the Canada-US treaty, a US resident can defer US tax on RRSP growth until withdrawal. Since 2014 that deferral is automatic for eligible individuals; no annual election form is required. When you withdraw, Canada withholds 25% on a lump sum, or 15% on periodic RRIF payments that stay within the treaty's periodic limit, and the US taxes the withdrawal with a foreign tax credit for the Canadian tax.

The trap in other states is that state income tax does not always follow the treaty. California, for example, taxes RRSP growth every year. Florida has no income tax, so there is nothing to conform. Your RRSP simply grows, and you plan the withdrawal schedule around the 15% periodic rate.

Establishing Florida as your domicile

Because Florida has no income tax, the state will not audit you for moving in. But the CRA cares whether you actually severed Canadian ties, and your prior state, if you passed through one, may care that you left. The evidence that helps on both fronts:

• A Florida Declaration of Domicile filed with the county clerk (Florida Statute 222.17).
• Homestead exemption on your Florida home.
• Florida driver's licence and vehicle registration, voter registration, and a Florida-based will.
• Closing or converting Canadian bank accounts to non-resident status and notifying your Canadian financial institutions of your departure date.

What this looks like from Miami

Fairlight sits in Brickell, and most of the Canada-to-Florida files we see share one pattern: the client planned the US side carefully and the Canadian side barely at all. The costly mistakes are choosing a departure date without checking the unrealized gain position, leaving a TFSA open into the first US year, and buying a home in the wrong month for homestead. All three are avoidable with a calendar and a spreadsheet, and all three are cheaper to fix before you leave than after.

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

"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

"No tax upon estates or inheritances or upon the income of natural persons who are residents or citizens of the state shall be levied by the state, or under its authority." — Florida Constitution, Article VII, Section 5(a), http://www.leg.state.fl.us/statutes/index.cfm?submenu=3#A7S05

"A person who, on January 1, has the legal title or beneficial title in equity to real property in this state and who in good faith makes the property his or her permanent residence or the permanent residence of another or others legally or naturally dependent upon him or her, is entitled to an exemption from all taxation, except for assessments for special benefits, up to the assessed valuation of $25,000 on the residence and contiguous real property." — Florida Statutes §196.031(1)(a), http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0100-0199/0196/Sections/0196.031.html

Practitioner note

The single highest-leverage decision in a Canada-to-Florida move is the departure date, because it fixes the deemed disposition value, the split of the final T1, and the start of the substantial presence clock all at once. We run three candidate dates through the numbers before a client books movers. If you have a private corporation, a large unrealized gain, or a spouse staying behind, add a fourth variable and start earlier.

Corridor guides

• Alberta to Florida: The Lowest-Rate Exit Meets Zero State Income Tax
• BC to Florida: Departure Tax, RRSP, and the Retiree Move
• Quebec to Florida: Three Tax Authorities and the Largest Rate Drop in Canada
• Calgary to Miami: Energy Finance, Departure Tax, and Alberta’s Cleanest Exit
• Montreal to Miami: The TP-1, Revenu Québec, and the Biggest Rate Drop in the Country
• Ottawa to Miami: What Happens to a Federal Pension When You Move to Florida
• Toronto to Miami: Ontario Surtax Out, Florida Homestead In
• Vancouver to Miami: Tech Money, the Substantial Presence Test, and the BC Property You Leave Behind
• Calgary to Orlando: Simulation, Defence Engineering, and Alberta's Lightest Exit
• Montreal to Orlando: Revenu Québec on the Way Out, Zero State Tax on the Way In
• Ottawa to Orlando: Defence Simulation, Federal Pensions, and Central Florida
• Toronto to Orlando: Simulation Tech, Corporate Relocation, and the Ontario Surtax You Leave Behind
• Vancouver to Orlando: Simulation, Gaming, and the BC Departure Tax
• Calgary to Tampa: Corporate Relocation, Defence Contractors, and Alberta's Smallest Rate Drop
• Montreal to Tampa: Three Tax Authorities and a Corporate Corridor
• Ottawa to Tampa: The MacDill Pipeline and a Federal Pension in a No-Tax State
• Toronto to Tampa: Corporate Relocation, the Ontario Surtax, and Tampa Bay
• Vancouver to Tampa: Corporate Relocation and the BC Property You Leave Behind

See also: Every Canada-to-US corridor, by city, province, and state — the full index of Fairlight moving guides.

Next step

If you are planning a move from Canada to Florida, Fairlight prepares the Canadian departure return, the first-year US return, and the ongoing cross-border filings from one office in Miami. See cross-border pricing or book a call.