Moving from Canada to Indiana: A Low Flat Rate, County Income Tax, and Indianapolis's Pharma and Logistics Corridor

Indianapolis is a pharma, logistics, and motorsports city (Eli Lilly, the FedEx hub, the Speedway), and Indiana's manufacturing belt and university towns draw Canadians as well. The tax picture is a low flat state income tax stepping down each year, plus a county income tax in every county that varies from under 1% to over 3%, a 7% sales tax, and a property tax cap that keeps homeowners' bills low.

Key takeaways

• Indiana's flat state income tax is 2.95% for 2026 and stepping down further.
• Every county levies its own income tax, from about 0.5% to over 3%; Marion County (Indianapolis) is about 2%.
• Sales tax is 7% statewide with no local additions.
• Property tax on a homestead is capped at 1% of gross assessed value.
• No estate tax. Indiana starts from federal AGI.

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.

Indiana's side

Flat state income tax of 2.95% for 2026, stepping down toward 2.9%; county income taxes in all 92 counties, about 2% in Marion County (Indianapolis), lower in most suburban counties; 7% sales tax with no local additions; property tax capped at 1% of gross assessed value for homesteads; no estate tax. Indiana starts from federal AGI and taxes capital gains as ordinary income.

The RRSP

Federally deferred under Article XVIII of the treaty and deferred for Indiana because the state starts from federal AGI. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, a US foreign tax credit federally, and Indiana state and county tax.

Who makes this move

Canadian pharma and biotech professionals to Eli Lilly and Indianapolis's life sciences cluster, Canadian logistics staff to the FedEx hub and Indiana's distribution sector, Ontario auto and manufacturing engineers to Indiana's plants, and Canadian academics to Purdue, Indiana University, and Notre Dame.

Worked example

A Toronto pharma manager moves to Carmel on June 30 with $200,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, and a Toronto condo sold in the departure year.

• Departure tax. $200,000 gain, $100,000 taxable, at about 53.5%: roughly $53,500.
• Condo. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; federal and Indiana deferral.
• Carmel. State 2.95% plus Hamilton County about 1.1%; combined top rate about 41%. HST 13% becomes sales tax 7%. Property tax on a $600,000 home capped near $6,000.

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

Indiana's state adjusted gross income tax rate is 2.95% for 2026; county rates are published in Departmental Notice #1 (Marion County 2.02%, Hamilton County 1.10%). — Indiana Department of Revenue, Individual Income Taxes, https://www.in.gov/dor/i-am-a/individual/

"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

Indiana's county tax varies by a factor of six across the state, and it follows your county of residence on January 1. A client who moves to Marion County in December pays about 2% for the whole following year; one who moves to Hamilton County pays about half that. We check the county rate by address before the client signs a lease.

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.