Moving from Canada to New Jersey: Graduated Rates to 10.75%, the Highest Property Tax, and the NYC Commute

A large share of Canadians who take Manhattan jobs live in New Jersey: Hoboken and Jersey City for the commute, Montclair and Summit for the schools, Princeton for the pharma corridor. New Jersey's tax picture is a graduated income tax that reaches 10.75% above $1 million, the highest property taxes in the US, a 6.625% sales tax, and its own gross income tax system that does not start from federal AGI, which matters for the RRSP.

Key takeaways

• New Jersey's graduated income tax runs 1.4% to 10.75%, with the top rate above $1 million and 8.97% above $500,000.
• No city income tax in New Jersey; a Manhattan commuter pays New York non-resident tax and claims a New Jersey credit.
• Sales tax is 6.625% statewide, reduced in Urban Enterprise Zones.
• Property tax is the highest in the US, near 2.2% effective.
• No estate tax since 2018, but an inheritance tax on transfers to non-lineal heirs. New Jersey computes its own gross income; confirm the RRSP position.

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.

New Jersey's side

Graduated gross income tax from 1.4% to 10.75%; no city income tax; 6.625% sales tax with reduced rates in Urban Enterprise Zones; property tax near 2.2% effective, the highest in the US; no estate tax, but an inheritance tax of 11% to 16% on transfers to beneficiaries other than spouses, children, parents, and grandchildren. New Jersey's gross income tax has its own categories of income and does not start from federal AGI. A New Jersey resident working in Manhattan pays New York non-resident tax and claims a New Jersey credit; the net effect approximates New York's rate. New Jersey offers a retirement income exclusion of up to $100,000 (joint) for taxpayers 62 and older with income under $150,000.

The RRSP

Federally deferred under Article XVIII of the treaty. New Jersey computes its own gross income rather than starting from federal AGI, and its treatment of treaty-deferred RRSP growth should be confirmed and documented in the first-year file; New Jersey has historically taxed some retirement account contributions and earnings differently from federal law. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, a US foreign tax credit federally, and New Jersey tax subject to its retirement income exclusion.

Who makes this move

Bay Street finance professionals working in Manhattan who live in Hoboken, Jersey City, or the commuter suburbs, Canadian pharma researchers to the Princeton and New Brunswick corridor (Johnson & Johnson, Bristol Myers Squibb, Merck), Canadian tech workers to Newark's growing sector, and Canadian academics to Princeton and Rutgers.

Worked example

A Toronto investment banker takes a Manhattan job and moves to Hoboken on June 30 with $300,000 of unrealized gain in a non-registered account, $600,000 in an RRSP, deferred compensation vesting over three years, and a Toronto condo sold in the departure year.

• Departure tax. $300,000 gain, $150,000 taxable, at about 53.5%: roughly $80,000.
• Condo. Sold as a resident under the principal residence exemption.
• Deferred comp. Split by working days; New York and New Jersey both tax their share, with a New Jersey credit for New York tax.
• RRSP. Federally deferred; New Jersey position documented.
• Hoboken. Effective rate on Manhattan wages approximates New York's; no New York City tax as a non-resident. HST 13% becomes sales tax 6.625%. Property tax on an $800,000 condo around $17,000.

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

"If your total income is $100,000 or less, you can exclude reported taxable pension, annuity, and IRA withdrawals up to the maximum amount for your filing status listed below. [...] Married/CU Couple, Filing Joint Return — $100,000." — New Jersey Division of Taxation, Retirement Income Exclusions, https://www.nj.gov/treasury/taxation/njit7.shtml

"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

The New Jersey advantage over Manhattan is the city tax: a Hoboken resident working in Manhattan avoids New York City's 3.876% because it applies to city residents only. The New Jersey disadvantage is property tax. For a high earner, the city tax saving usually wins; for a homeowner in a high-tax suburb, it is closer.

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.