Moving from Canada to Vermont: Graduated Rates to 8.75%, High Property Tax, and the Quebec Border

Vermont is the US state closest to Montreal, and Burlington's healthcare, university, and technology employers, along with the state's outdoor and food economy, draw Quebecers and other Canadians. Vermont's tax picture is a graduated income tax topping out at 8.75%, among the higher rates in the US, high property taxes, a 6% sales tax, and an estate tax with a $5 million exemption.

Key takeaways

• Vermont's graduated income tax runs 3.35% to 8.75%. No local income taxes.
• Sales tax is 6% statewide plus a 1% local option in Burlington and some other towns.
• Property tax is high, near 1.8% effective, with an income-sensitive adjustment for residents.
• Vermont's estate tax exemption is $5 million with a flat 16% rate above it.
• Vermont starts from federal AGI and partially exempts Social Security below an income threshold.

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.

Vermont's side

Graduated income tax from 3.35% to 8.75%; no local income taxes; 6% sales tax plus a 1% local option tax in Burlington and some other municipalities; property tax near 1.8% effective, with an income-based property tax credit for residents; estate tax on estates above $5 million at a flat 16%. Vermont starts from federal AGI, exempts Social Security below an income threshold, and taxes capital gains as ordinary income with a partial exclusion.

The RRSP

Federally deferred under Article XVIII of the treaty and deferred for Vermont 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 Vermont's graduated rates.

Who makes this move

Quebec healthcare professionals to the University of Vermont Medical Center, Canadian academics to UVM and Middlebury, Quebec and Ontario tech workers to Burlington's software and hardware employers (including GlobalFoundries in Essex Junction), Canadian food and beverage professionals to Vermont's producers, and Canadian outdoor-industry staff to the ski and recreation economy.

Worked example

A Montreal nurse moves to Burlington on June 30 with $120,000 of unrealized gain in a non-registered account, $350,000 in an RRSP, and a Montreal condo sold in the departure year.

• Departure tax. $120,000 gain, $60,000 taxable, at about 53.3%: roughly $32,000 across the T1 and TP-1.
• Condo. Sold as a resident under the principal residence exemption on both returns.
• RRSP. No tax on departure; federal and Vermont deferral.
• Burlington. Combined top rate about 45.75%. Sales tax 14.975% becomes 7%. Property tax on a $500,000 home around $9,000 before the resident credit.

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

"Single Individuals, Schedule X: If VT Taxable Income is Over 0 But Not Over 49,400 — VT Base Tax is 0.00 Plus 3.35% of the amount over 0; [...] Over 249,700 — 16,175.00 Plus 8.75% of the amount over 249,700." — Vermont Department of Taxes, 2025 Vermont Tax Rate Schedules, https://tax.vermont.gov/sites/tax/files/documents/TaxRateSched-2025.pdf

"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

Vermont is one of the smaller rate drops for a Quebec mover, and its property tax on a like-for-like home is several times Montreal's. The state's income-sensitive property tax credit softens it for residents; the sales tax drop from 14.975% to 7% is the line that improves most.

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.