Moving to the US from Canada: The Tax Checklist, in the Order Things Actually Happen

Short version: Moving From Canada to the U.S.: Your First U.S. Tax Year

Most Canada-to-US moves go wrong in the same way: the US side is planned carefully and the Canadian side barely at all, and the order of operations is ignored. The departure date fixes the deemed disposition value, the split of the final Canadian return, the start of the US substantial presence clock, and the RRSP and TFSA decisions all at once. This checklist runs in the order the decisions have to be made. For a deeper guide to any single step, see every cross-border tax topic guide, organized by situation.

Before you set a date

1. Inventory your assets and their unrealized gains. Non-registered investments, private company shares, crypto, and foreign property are all deemed sold on departure. Canadian real estate, RRSPs, TFSAs, RESPs, and pensions are not.
2. Run the departure tax at your province's rate. Half of the deemed gain is taxable at your marginal rate: roughly 24 cents per dollar of gain in Alberta, 27 cents in Ontario, Quebec, and BC.
3. Decide what to realize before you go. If your destination taxes capital gains as ordinary income (California, New York, Minnesota, Oregon), realizing in Canada at half inclusion is often cheaper.
4. Deal with any private corporation. It is deemed sold, loses CCPC status on departure, and becomes a US controlled foreign corporation with Form 5471 filings. Wind it up and pay the capital dividend account while you are still a Canadian resident, or plan for the US filings.
5. Decide on the RRSP. In most states it is untouched and stays deferred under the treaty. In California it is taxed annually; restructure toward growth assets or draw it down before departure. Check the destination state's position.
6. Close the TFSA. No departure tax, but it loses its tax-free status the day you become a US person and may be a foreign trust with Form 3520 filings.
7. Count your US days for the prior three years. The substantial presence test may already have been met. If so, your first US tax year is earlier than the move, and so is your FBAR and TFSA exposure.
8. Decide on the Canadian home. Sell it under the principal residence exemption, or rent it under NR6 and Section 216 with Section 116 on a later sale. Toronto and Vancouver homes left empty face vacancy taxes.
9. Check the destination state. Income tax, RRSP conformity, estate tax, property tax, and homestead rules vary; Fairlight's state guides cover each.
10. Set the date. After steps 1 through 9, not before.

In the departure year

1. File the final Canadian return (and the TP-1 if you are leaving Quebec) with a departure date. Report the deemed disposition on Form T1243, list property on Form T1161 if it exceeds $25,000, and post security under Form T1244 if you are deferring tax.
2. Notify Canadian financial institutions of your non-resident status and departure date so Part XIII withholding applies correctly to future Canadian-source income.
3. File NR301 with any Canadian pension payer to have the treaty's 15% rate applied to periodic payments instead of the default 25%.
4. Confirm the end date of provincial health coverage and start US coverage the same month.
5. Tell your employer's payroll the departure date in writing so equity vesting after the move is split correctly between Canada and the US.

In the first US year

1. File a dual-status US return (non-resident for the part of the year before residency, resident after), or elect full-year treatment if it is advantageous and you qualify.
2. Make the Article XIII(7) election on the first US return to step up your US basis to the departure-date value on assets that were deemed sold in Canada, so the pre-departure gain is not taxed twice.
3. File the FBAR on Canadian accounts if the aggregate exceeded $10,000 at any point, and Form 8938 above its thresholds.
4. File Form 5471 for any surviving Canadian corporation.
5. Establish domicile in the destination state: driver's licence, voter registration, homestead application where available, and a Declaration of Domicile in Florida.

Every year after

1. Canadian filings continue for Canadian-source income: Section 216 for rental income, NR4 slips for pension and RRIF withdrawals, and Section 116 clearance when you sell Canadian real estate.
2. US filings continue: the 1040, FBAR, and Form 8938 as applicable, and the state return.
3. Plan RRSP and RRIF withdrawals around the treaty's 15% periodic rate and the destination state's treatment.
4. Revisit the estate plan. You have moved from a system with no estate tax (Canada deems assets sold at death) to one with a federal estate tax above $15 million and, in some states, a state estate tax with a far lower exemption.

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 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 single highest-leverage decision in a Canada-to-US move is the departure date, and it should be set last, after the asset inventory, the corporate decision, the RRSP and TFSA decisions, and the day count. We run three candidate dates through the numbers before a client books movers.

Next step

Fairlight prepares the Canadian departure return, the first-year US return, and ongoing cross-border filings. See cross-border pricing or book a call.