Moving from Canada to Maryland: The County Piggyback Tax, DC Reciprocity, and the Bethesda Corridor

Maryland is where a large share of Canadians working in Washington actually live: Bethesda and Silver Spring for NIH and the federal agencies, Columbia and Fort Meade for cybersecurity and the NSA contractor base, Baltimore for Johns Hopkins and the port. Maryland's tax picture is a graduated state income tax that now tops out at 6.5% after new top brackets were added in 2025, plus a county income tax of up to 3.3%, for a combined state and local rate near 9% in the DC suburbs, along with both an estate tax and an inheritance tax.

Key takeaways

• Maryland's graduated state income tax runs 2% to 6.5%, with 6.25% and 6.5% brackets added in 2025 for income above $500,000 (single) / $600,000 (joint); every county adds a piggyback tax of 2.25% to 3.3% (Montgomery County 3.2%).
• Maryland, DC, and Virginia tax wages where you live under reciprocity, so a Bethesda resident working in DC pays Maryland.
• Sales tax is 6% statewide with no local additions.
• Property tax is near 1% effective.
• Maryland has an estate tax with a $5 million exemption and an inheritance tax of 10% on transfers to non-lineal heirs.

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.

Maryland's side

Graduated state income tax from 2% to 6.5% (6.25% on income above $500,000 single / $600,000 joint, and 6.5% above $1 million / $1.2 million), plus county income taxes from 2.25% to 3.3% (Montgomery County 3.2%, Howard 3.2%, Baltimore City 3.2%, Anne Arundel graduated to 3.2%); wages taxed where you live under the DC-Maryland-Virginia reciprocity agreements; 6% sales tax with no local additions; property tax near 1% effective with a Homestead Tax Credit that caps assessment increases; estate tax on estates above $5 million with a 16% top rate; inheritance tax of 10% on transfers to beneficiaries other than spouses, children, parents, siblings, and grandchildren. Maryland starts from federal AGI and allows a pension exclusion of about $39,500 for taxpayers 65 and older.

The RRSP

Federally deferred under Article XVIII of the treaty and deferred for Maryland 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 Maryland state and county tax after the pension exclusion.

Who makes this move

Canadian health scientists to NIH and the FDA in Bethesda and Silver Spring, Ottawa cybersecurity and intelligence professionals to the Fort Meade contractor base, Canadian clinicians and researchers to Johns Hopkins, Canadian consultants and policy staff working in DC who choose Montgomery County for schools, and Canadian port and logistics professionals to Baltimore.

Worked example

An Ottawa health scientist moves to Bethesda on June 30 with $200,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, and a Kanata home sold in the departure year.

• Departure tax. $200,000 gain, $100,000 taxable, at about 53.5%: roughly $53,500.
• Home. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; federal and Maryland deferral.
• Bethesda. State 5.75% plus Montgomery County 3.2%; combined top rate about 46%. HST 13% becomes sales tax 6%. Property tax on a $900,000 home around $9,000.

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

"The local income tax is calculated as a percentage of your taxable income. Local officials set the rates, which range between 2.25% and 3.30% for the current tax year." — Comptroller of Maryland, Maryland Income Tax Rates and Brackets, https://services.marylandcomptroller.gov/taxes?id=kb_article_view&sysparm_article=KB0010014

"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

Maryland's county piggyback tax makes Bethesda about three points more expensive than Arlington for the same downtown job, and Maryland has an estate tax and an inheritance tax where Virginia has neither. Canadians who choose Montgomery County for the schools should do so knowing the price.

Corridor guides

• Calgary to Washington DC: Energy Policy, Trade, and the Reciprocity Decision
• Montreal to Washington DC: International Organizations, Three Authorities, and the Reciprocity Decision
• Ottawa to Washington DC: Government, Defence, and Tech Taxes, and Why Arlington Changes the Answer
• Toronto to Washington DC: Consulting, Policy, and the Three-Jurisdiction Decision
• Vancouver to Washington DC: Policy, Tech, and the Reciprocity Decision

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.