Moving from Canada to Washington State: No Income Tax, a 7% Capital Gains Excise, and a Low Estate Tax Exemption

Washington is the no-income-tax state next door to BC, and Vancouver-to-Seattle is the busiest tech corridor on the border. The state has no personal income tax, but it is not a Florida. Since 2022 Washington has imposed a 7% excise on long-term capital gains above an indexed threshold (roughly $270,000), with a further surcharge on gains above $1 million; it has one of the highest sales taxes in the country; it taxes businesses on gross receipts; and its estate tax starts at a far lower exemption than the federal one.

Key takeaways

• No state income tax on wages, RRSP withdrawals, or ordinary investment income.
• 7% excise on long-term capital gains above roughly $270,000 a year, with an additional 2.9% on gains above $1 million. Real estate and retirement accounts are exempt; stock and RSU sales are not.
• Sales tax is about 10.35% in Seattle and above 10% across most of King County.
• Washington's estate tax exemption is about $3 million with rates up to 35%, against the federal $15 million.
• Canada's departure tax applies on the way out; BC's roughly 53.5% top rate makes it one of the more expensive exits.

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 interaction with Washington's excise matters for equity-heavy movers. A gain realized before departure is taxed once in Canada at half inclusion. The same gain realized after arrival in Washington is taxed federally at preferential rates and, above the threshold, by Washington at 7% to 9.9%, with the treaty's Article XIII(7) basis step-up available federally but with no equivalent in Washington's excise.

Washington's side

• Income tax. None on wages or ordinary income.
• Capital gains excise. 7% on Washington-allocated long-term gains above the annual threshold (about $270,000, indexed), plus 2.9% on gains above $1 million. Exemptions include real estate, retirement accounts, and certain small business sales. Stock, RSU, and crypto sales are covered.
• Sales tax. 6.5% state plus local; about 10.35% in Seattle, 10.1% to 10.5% across King County, lower in Spokane and rural counties. No sales tax on most groceries.
• B&O tax. Businesses, including sole proprietors and consultants, pay a gross receipts tax with no deduction for expenses. Rates vary by classification; service businesses pay around 1.75% to 2%.
• Property tax. Effective rates near 0.9% to 1.1% in King County.
• Estate tax. Exemption around $3 million, rates from 10% to 35%. No portability between spouses.

The RRSP in Washington

Untouched on departure. Federally deferred under Article XVIII of the treaty; Washington has no income tax, so there is no state layer. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit. Retirement account gains are also exempt from the capital gains excise.

RSUs and the excise

Tech movers to Seattle usually carry RSUs. The vest itself is ordinary income, split between Canada and the US by working days and not subject to Washington's excise. The subsequent sale of vested shares is a capital transaction: a large sale in a single year can cross the threshold and trigger the 7%. Spreading sales across years, or realizing gains before departure while still Canadian, are the two levers.

Who moves to Washington

Vancouver and Toronto tech workers to Amazon, Microsoft, and the Seattle startup scene; Calgary engineers to Boeing and aerospace; and BC residents moving across the border for cost of living without changing time zone.

Worked example

A Vancouver software engineer moves to Seattle on April 30 with $300,000 of unrealized gain in a non-registered account, $200,000 of vested employer shares with a $50,000 cost base, $400,000 in an RRSP, and a Vancouver condo sold in the departure year.

• Departure tax. $300,000 plus $150,000 of gains, $225,000 taxable, at about 53.5%: roughly $120,000.
• Condo. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; federal deferral; exempt from the Washington excise.
• Post-move share sales. Gains above the threshold in any year face the 7% excise. Sell in tranches.
• Seattle. No state income tax. Sales tax 12% becomes 10.35%.

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

Washington's capital gains tax is a "7% tax on the sale or exchange of long-term capital assets"; "The standard deduction for 2025 is $278,000." — Washington State Department of Revenue, Capital gains tax, https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax

Washington's estate tax: "The filing threshold and exclusion amount is set at $3,076,000 for decedents passing away between January 1, 2026 and June 30, 2026." — Washington State Department of Revenue, Estate tax, https://dor.wa.gov/taxes-rates/other-taxes/estate-tax

Practitioner note

The Washington excise catches exactly the transaction a Seattle tech worker is most likely to have: a large single-year sale of employer stock. We map the vesting and sale schedule against the annual threshold before the move so the client is not paying 7% on a gain that could have been realized in Canada or spread across two years.

Corridor guides

• Alberta to Washington State: No Income Tax, a Capital Gains Excise, and the Energy-to-Tech Corridor
• Ontario to Washington State: No Income Tax, a Capital Gains Excise, and the Tech Corridor to Seattle
• Quebec to Washington State: The TP-1, No Income Tax, and the Capital Gains Excise
• Calgary to Seattle: Energy to Tech, No Income Tax, and the Capital Gains Excise
• Montreal to Seattle: AI, the Departure Tax, and the Capital Gains Excise
• Ottawa to Seattle: Cloud Security, the Defence-to-Tech Pipeline, and the Capital Gains Excise
• Toronto to Seattle: Fintech, No Income Tax, and the Capital Gains Excise
• Vancouver to Seattle: RSUs, the Tech Corridor, and Two Different Tax Systems

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

Next step

Fairlight prepares the BC departure return, the equity timing plan, and the first-year US return for Seattle-area clients. See cross-border pricing or book a call.