Moving from Canada to Texas: No State Income Tax, but Property Tax, Sales Tax, and Departure Tax Still Apply

Texas is the largest no-income-tax state and the destination for Alberta's energy sector, Ontario's corporate relocations, and a growing share of Canadian tech workers choosing Austin. The state side of the move is nearly free of income tax; what Texas charges instead is property tax at some of the highest effective rates in the country and a sales tax of 8.25% in the major cities. The Canadian side is where the cost sits, and it is the same departure tax regardless of which province you leave.

Key takeaways

• Texas has no personal income tax. US tax on salary, RRSP withdrawals, and capital gains is federal only.
• Property tax runs about 1.6% to 2.2% of assessed value depending on county and school district; the homestead exemption removes a fixed amount from school district taxable value and caps assessment growth at 10% a year.
• Sales tax is 6.25% state plus up to 2% local, 8.25% in Houston, Dallas, Austin, and San Antonio.
• No estate tax, no inheritance tax.
• Canada's departure tax applies on the way out; the rate depends on your province.

The Canadian departure

Departure tax is a deemed sale of 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 for illiquid assets.

The rate is your province's. On a $300,000 unrealized gain: roughly $72,000 from Alberta, $80,000 from Ontario, Quebec, or BC.

Texas's side

• Income tax. None. The Texas Constitution requires voter approval for any personal income tax.
• Property tax. Set by county, city, school district, and special districts. Effective rates of 1.6% to 2.2% are common in the major metros. The residence homestead exemption removes a fixed amount from school district taxable value (raised repeatedly in recent years) and limits annual increases in appraised value to 10%. File the homestead application with the county appraisal district after you move in.
• Sales tax. 6.25% state, up to 2% local, 8.25% in the major cities.
• Franchise tax. Businesses with revenue above the no-tax-due threshold (several million dollars) pay a margin tax. Most individuals never see it.
• Estate tax. None.
• Homestead protection. Texas homestead law also protects the home from most creditors, which matters to business owners.

The RRSP in Texas

Untouched on departure. Federally deferred under Article XVIII of the treaty, with no Texas layer to break the deferral. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit.

Who moves to Texas

Calgary energy professionals to Houston, Toronto and Montreal corporate staff to Dallas and Plano, tech workers to Austin, and defence and cybersecurity professionals to San Antonio. Alberta-to-Texas is the single busiest province-to-state energy corridor.

Worked example

A Calgary energy executive moves to Houston on June 30 with $400,000 of unrealized gain in a non-registered account, $1 million in an RRSP, a holding company with $500,000 of investments, and a Calgary home sold in the departure year.

• Departure tax. $400,000 gain, $200,000 taxable, at about 48%: roughly $96,000, plus the holding company shares at their own gain.
• Holding company. Wind up before June 30 or accept Form 5471 filings in the US.
• Home. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; periodic withdrawals later at 15%.
• Houston. No state income tax. Property tax on a $900,000 home around $16,000 to $18,000 a year before homestead. GST 5% becomes sales tax 8.25%.

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

Texas residence homestead exemptions and the 10% appraisal cap are administered by county appraisal districts under the Texas Property Tax Code. — Texas Comptroller of Public Accounts, Residence Homestead Exemption, https://comptroller.texas.gov/taxes/property-tax/exemptions/

"Texas imposes a 6.25 percent state sales and use tax on all retail sales, leases and rentals of most goods, as well as taxable services. Local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) can also impose up to 2 percent sales and use tax for a maximum combined rate of 8.25 percent." — Texas Comptroller of Public Accounts, Sales and Use Tax, https://comptroller.texas.gov/taxes/sales/

Practitioner note

Texas movers budget for zero income tax and are surprised by the property tax bill, which on a Houston or Austin home can exceed what they paid in provincial income tax on a modest salary. The homestead application is the single most valuable form on the Texas side; file it the year you move in.

Corridor guides

• BC to Texas: The PST Disappears, the Property Tax Arrives, and the Departure Tax Runs at BC's Top Rate
• Ontario to Texas: One of the Largest Rate Drops Available, and the OHIP and Surtax Wind-Down
• Quebec to Texas: The TP-1, the Biggest Rate Drop in Canada, and Texas Property Tax
• Calgary to Austin: The Energy-to-Tech Pivot and Zero State Income Tax
• Montreal to Austin: AI, Three Authorities, and Zero State Income Tax
• Ottawa to Austin: Defence Tech, the RRSP, and One of the Largest Rate Drops on the Map
• Toronto to Austin: The Tech Corridor, the RRSP, and Zero State Income Tax
• Vancouver to Austin: The Tech-Lifestyle Move and Zero State Income Tax
• Calgary to Dallas: Energy, Land Wealth, and One of the Cleanest Rate Drops on the Map
• Montreal to Dallas: Tech, Aerospace, and the Triple Filing
• Ottawa to Dallas: The Defence Corridor and Zero State Income Tax
• Toronto to Dallas: The Corporate Relocation Corridor and Zero State Income Tax
• Vancouver to Dallas: Tech, Energy, and Zero State Income Tax
• Calgary to Houston: Same Industry, Two Tax Systems, and Zero State Income Tax
• Montreal to Houston: Aerospace, Energy, and the Three-Authority Departure
• Ottawa to Houston: Energy, the Government-to-Industry Pipeline, and Zero State Income Tax
• Toronto to Houston: Energy, the Medical Center, and Zero State Income Tax
• Vancouver to Houston: Energy, LNG, and Zero State Income Tax
• Calgary to San Antonio: Energy, Military, and the Smallest Rate Drop in Texas
• Montreal to San Antonio: The Defence-Cyber Corridor and Zero State Income Tax
• Ottawa to San Antonio: The JBSA Corridor, the Ontario Surtax, and Zero State Income Tax
• Toronto to San Antonio: USAA, Military Tech, and Zero State Income Tax
• Vancouver to San Antonio: The Real Estate Arbitrage Move and Zero State Income Tax

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

Next step

Fairlight prepares the Canadian departure return, the corporate wind-up where needed, and the first-year US return for Texas clients. See cross-border pricing or book a call.