Moving from Canada to South Carolina: A Falling Top Rate, Retirement Deductions, and the Coastal Retiree Corridor

South Carolina's coast has been a Canadian snowbird and retiree destination for decades, and its upstate manufacturing corridor (BMW in Spartanburg, Boeing in North Charleston, Michelin in Greenville) recruits Canadian engineers. The tax picture changed in 2026: H. 4216, signed in March 2026, replaced the old graduated schedule with two rates — 1.99% on income under $30,000 and 5.21% above — with trigger-based cuts scheduled to lower the top rate further. Add low property tax on owner-occupied homes, retirement income deductions, and no estate tax.

Key takeaways

• South Carolina's income tax for 2026 has two rates: 1.99% on income under $30,000 and a top rate of 5.21% above it, with further cuts as revenue triggers are met. No city income tax.
• Combined sales tax runs 7% to 9% depending on county.
• Property tax on owner-occupied homes is very low, near 0.5% effective, because primary residences are assessed at 4% of value and exempt from school operating tax.
• No estate tax.
• South Carolina starts from federal taxable income, exempts Social Security, and allows retirement income deductions ($10,000 under 65, $15,000 at 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.

South Carolina's side

Two-rate income tax for 2026 under H. 4216: 1.99% on income under $30,000 and 5.21% on income of $30,000 and above (minus $966), with the top rate scheduled to fall further when revenue triggers are met; no city income tax; 6% state sales tax plus local, 7% to 9% combined; property tax near 0.5% effective on owner-occupied homes (assessed at 4% of value and exempt from school operating millage), higher on second homes; no estate tax. South Carolina starts from federal taxable income, exempts Social Security, allows a $10,000 retirement income deduction (rising to $15,000 at 65), and excludes 44% of long-term capital gains.

The RRSP

Federally deferred under Article XVIII of the treaty and deferred for South Carolina 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 South Carolina's rates after the retirement income deduction. CPP and OAS, treated like Social Security under the treaty, are exempt from South Carolina tax.

Who makes this move

Canadian retirees going permanent in Myrtle Beach, Hilton Head, and Charleston after years of wintering, Ontario and Quebec engineers to BMW Spartanburg, Boeing North Charleston, and the upstate manufacturing corridor, Canadian healthcare professionals to MUSC and the Charleston and Greenville health systems, and Canadian hospitality staff to the coastal resorts.

Worked example

An Ontario couple leaves on September 30 with $250,000 of unrealized gain in a non-registered account, $900,000 in RRSPs, and a Toronto home sold in the departure year.

• Departure tax. $250,000 gain, $125,000 taxable, at about 53.5%: roughly $67,000.
• Home. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; RRIF conversion and periodic withdrawals at 15% Canadian withholding; South Carolina taxes RRIF income after the $15,000 deduction at 65.
• CPP/OAS. Taxable only in the US; exempt from South Carolina tax; no clawback.
• Hilton Head. Combined top rate about 42.2%. HST 13% becomes sales tax 7%. Property tax on a $700,000 owner-occupied home around $3,500.

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 tax rate for income less than $30,000 is 1.99%. The tax rate for income from $30,000 and above is 5.21%, minus $966." — South Carolina Department of Revenue, Information about H. 4216, https://dor.sc.gov/news/information-about-h-4216

"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

South Carolina's 4% assessment ratio on owner-occupied homes is the feature retirees care about: a $700,000 primary residence carries a property tax bill a fraction of what the same home would carry as a second home at the 6% ratio. Snowbirds who become residents should re-file for the 4% ratio the year they qualify. The 2026 rate overhaul means we confirm the current-year schedule before modelling.

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.