Moving from Canada to Washington DC: Graduated Rates to 10.75%, No Local Layer, and the MD/VA Reciprocity Decision

Washington, DC draws Canadians to the World Bank and IMF, the Canadian Embassy, think tanks, consulting firms, and the federal agencies' contractor base. The District taxes income on graduated brackets from 4% to 10.75%, with no separate county or city layer, and it has an estate tax. The larger decision for most movers is not DC's rates but whether to live in the District at all, because Virginia and Maryland across the line tax wages where you live under reciprocity, and Virginia is about five points cheaper at the top.

Key takeaways

• The District's graduated income tax runs 4% to 10.75%, with no separate county or city layer.
• DC, Maryland, and Virginia tax wages where you live under reciprocity; a DC resident working anywhere in the region pays DC.
• Sales tax is 6%.
• Property tax is near 0.85% effective with a homestead deduction.
• DC's estate tax zero bracket is $4,988,400 for 2026. International organization salaries have their own federal treatment for G-4 visa holders.

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.

The District's side

Graduated income tax from 4% to 10.75%, with the top rate above $1 million and 9.75% above $500,000; no separate county or city income tax; wages taxed where you live under the DC-Maryland-Virginia reciprocity agreements; 6% sales tax; property tax near 0.85% effective with a homestead deduction and an assessment cap; estate tax on estates above $4,988,400 (the 2026 zero bracket) with rates to 16%. The District starts from federal AGI. Salaries paid by the World Bank, IMF, and similar organizations to non-US-citizen staff on G-4 visas are exempt from US federal income tax; the District generally follows the federal exemption, and the position should be documented.

The RRSP

Federally deferred under Article XVIII of the treaty and deferred for the District because it 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 the District's graduated rates.

Who makes this move

Canadian economists and finance professionals to the World Bank, IMF, and Inter-American Development Bank, Ottawa policy professionals and diplomats to the Canadian Embassy and think tanks, Canadian consultants to the Washington offices of the large firms, Canadian lawyers to the international trade bar, and Canadian journalists and communications professionals to the capital's media.

Worked example

An Ottawa economist moves to the District on August 31 for a World Bank role with $180,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, and a Glebe home sold in the departure year.

• Departure tax. $180,000 gain, $90,000 taxable, at about 53.5%: roughly $48,000.
• Home. Sold as a resident under the principal residence exemption.
• World Bank salary. Federal exemption on G-4; District treatment documented.
• RRSP. No tax on departure; federal and District deferral.
• The District. HST 13% becomes sales tax 6%. Property tax on an $800,000 home around $6,800 after the homestead deduction. DC estate tax above $4,988,400 (2026).

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

"Not over $10,000 — 4% of the taxable income. [...] Over $500,000 but not over $1,000,000 — $42,775, plus 9.75% of the excess above $500,000. Over $1,000,000 — $91,525, plus 10.75% of the excess above $1,000,000." — DC Office of Tax and Revenue, DC Individual and Fiduciary Income Tax Rates, https://otr.cfo.dc.gov/page/dc-individual-and-fiduciary-income-tax-rates

"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 District is the right answer for Canadians who want to live in the city and for G-4 visa holders whose salary the District exempts. For everyone else with a downtown job, Arlington is about five points cheaper at the top and has no estate tax. We run all three jurisdictions by address before the client signs a lease.

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.