Moving from the US to Ontario: What Changes on Your Taxes, and What Follows You

Ontario is the province most Americans move to: Toronto's finance and tech sectors, Ottawa's government and tech employers, Waterloo's engineering companies, and the universities. It is also a high-tax province, with a combined top marginal rate of about 53.5% including a provincial surtax, a 13% HST, and a real estate market with its own foreign-buyer taxes. The US filings follow you regardless of province, and the accounts that are ordinary in Canada are extraordinary to the IRS.

Key takeaways

• No arrival tax. Property is deemed acquired at fair market value when you become a Canadian resident; your US basis is unchanged.
• Ontario's combined top rate is about 53.5%. The foreign tax credit generally eliminates US tax on Ontario-taxed employment income.
• OHIP has had no waiting period for new residents since 2020; coverage begins on arrival once you register.
• Ontario's Non-Resident Speculation Tax of 25% applies to residential purchases by foreign nationals in the province, with exemptions for permanent residents and certain work-permit holders; Toronto adds its own land transfer tax.
• Do not open a TFSA and do not hold Canadian mutual funds in a taxable account.

Becoming an Ontario resident

Canadian tax residency starts when you establish residential ties. From that date Canada taxes worldwide income, and under section 128.1 of the Income Tax Act most property is deemed acquired at fair market value on arrival, so only post-arrival growth is taxed here. Your US basis does not move.

Ontario specifics:

• Provincial tax. Brackets top out at 13.16%, plus a two-tier surtax on provincial tax above two thresholds, for a combined top rate near 53.5%.
• Sales tax. 13% HST.
• OHIP. No waiting period since March 2020; register on arrival with proof of residence and immigration status.
• Land transfer tax. Provincial tax graduated to 2.5% (3% above $2 million for residential), plus Toronto's municipal land transfer tax at the same rates for purchases in the city.
• Non-Resident Speculation Tax. 25% on residential purchases anywhere in Ontario by foreign nationals, foreign corporations, and taxable trustees, with exemptions for permanent residents, certain Ontario Immigrant Nominee Program nominees, and some work-permit holders who occupy the home, and rebates for those who later become permanent residents.
• Toronto Vacant Home Tax. Applies to Toronto homes unoccupied for more than six months in a year.

What follows you from the US

• Annual 1040 with Form 1116 foreign tax credits; Ontario's rates generally eliminate US tax on employment income, with excess credits carrying forward ten years.
• FBAR and Form 8938 on Canadian accounts above thresholds.
• PFIC. Canadian mutual funds and Canadian-listed ETFs each require Form 8621. Hold US-listed ETFs instead.
• TFSA. Taxable in the US and potentially a foreign trust. Skip it.
• RRSP. Canadian deduction, US deferral under the treaty.
• Roth IRA. Article XVIII(7) election on the first Canadian return; no contributions after arrival.
• 401(k) and IRA. Stay in the US; taxable in Canada on withdrawal with a foreign tax credit; section 60(j) rollover to an RRSP available.
• T1135 once non-Canadian property exceeds $100,000 CAD in cost (arrival year exempt).
• State exit. New York and California audit departures; file part-year returns and close residency formally.

Who moves to Ontario

Americans transferring into Toronto's banks and tech companies, US tech workers to Waterloo's engineering employers, American academics to the University of Toronto and Ontario's universities, US government-adjacent professionals to Ottawa, and Americans with Canadian spouses.

Worked example

An American software engineer moves from New York to Toronto on July 1 with $400,000 in a US brokerage account (US basis $250,000), $300,000 in a 401(k), RSUs continuing to vest, and a Roth IRA of $80,000.

• Arrival. Brokerage deemed acquired at $400,000 for Canadian purposes; US basis stays at $250,000.
• RSUs. Vests after arrival are split by working days; the Canadian portion is taxed in Ontario at rates up to 53.5%, with a foreign tax credit on the 1040.
• 401(k). Left in place.
• Roth. Article XVIII(7) election on the first T1; no further contributions.
• Housing. Buying in Toronto on a work permit may trigger the 25% NRST unless an exemption applies; many wait for permanent residence or claim the rebate later.
• New York exit. Part-year New York State and City returns; close residency formally.
• Reporting. FBAR and Form 8938 on new Canadian accounts; no TFSA, no Canadian mutual funds.

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

"You become a resident of Canada for income tax purposes when you have enough residential ties in Canada." — Canada Revenue Agency, Newcomers to Canada, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/newcomers-canada-immigrants.html

"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

"Effective October 25, 2022, the NRST rate is 25%." — Government of Ontario, Non-Resident Speculation Tax, https://www.ontario.ca/document/land-transfer-tax/non-resident-speculation-tax

Practitioner note

The Ontario-specific trap is housing: the 25% Non-Resident Speculation Tax on a $1.2 million Toronto home is $300,000, and it applies to most work-permit holders unless an exemption or rebate is available. We look at the immigration timeline before the client looks at listings. The US-side trap is the same as every province: no TFSA, no Canadian mutual funds.

Other provinces: Alberta · British Columbia · Manitoba · New Brunswick · Newfoundland and Labrador · Nova Scotia · PEI · Quebec · Saskatchewan. Browse every corridor by city, province, and state.

Next step

Fairlight prepares the first Canadian return, the ongoing US return with foreign tax credits, and the FBAR and Form 8938 filings for Americans in Ontario. See cross-border pricing or book a call.