Ontario to Texas: One of the Largest Rate Drops Available, and the OHIP and Surtax Wind-Down

Ontario to Texas is a 16-point rate drop on top-bracket income: Ontario's combined top rate of about 53.5% becomes a federal-only 37%. Toronto's corporate relocations to Dallas and Plano, its tech workers to Austin, and its energy and medical professionals to Houston make it one of the busiest province-to-state corridors. The Ontario side carries the departure tax and the OHIP wind-down; the Texas side carries property tax.

Key takeaways

• Ontario's roughly 53.5% top rate, including the provincial surtax, sets the departure tax. On a $300,000 unrealized gain, about $80,000.
• Texas has no state income tax; US tax is federal only.
• 13% HST becomes 8.25% sales tax in the major Texas cities.
• Texas property tax runs 1.6% to 2.2% of assessed value; file the homestead application after you move in.
• OHIP ends on permanent departure.

The Ontario departure

Departure tax applies to non-registered investments, private company shares, crypto, and foreign property at fair market value on the departure date. Ontario 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 Ontario surtax ends on departure. The Toronto home is excluded from departure tax; rent it under NR6 and Section 216, sell it in the departure year, or face Toronto's Vacant Home Tax if it sits empty. An Ontario professional corporation is deemed sold, loses CCPC status, and becomes a US controlled foreign corporation with Form 5471 filings; wind it up before departure.

Texas's side

No income tax; property tax at 1.6% to 2.2% effective, with a homestead exemption on school district taxable value and a 10% annual appraisal cap; 8.25% sales tax in Houston, Dallas, Austin, and San Antonio; franchise tax on businesses above a multi-million-dollar revenue threshold; no estate tax; strong homestead creditor protection.

The RRSP in Texas

Untouched on departure, federally deferred under the treaty, with no Texas layer. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit.

Equity and equalization

RSUs vesting after the move are split by working days between Canada and the US; no Texas layer. If the relocation package includes tax equalization, the settlement arrives a year later, is taxable, and should be reconciled against the actual Ontario departure return and US return; equalization providers frequently omit the deemed disposition.

Who makes this move

Toronto corporate staff to Dallas, Plano, and Frisco; Toronto and Waterloo tech workers to Austin; Ontario energy and medical professionals to Houston; and Ontario defence and cybersecurity staff to San Antonio.

Worked example

A Toronto finance director relocating with a Dallas-based employer leaves on June 30 with $300,000 of unrealized gain in a non-registered account, $700,000 in an RRSP, RSUs vesting after the move, tax equalization in the package, and a Toronto house sold in the departure year.

• Departure tax. $300,000 gain, $150,000 taxable, at about 53.5%: roughly $80,000.
• House. Sold as a resident under the principal residence exemption.
• RSUs. Vests split by working days; no Texas layer.
• Equalization. Settlement reconciled against the actual T1 and US return.
• RRSP. No tax on departure; periodic withdrawals later at 15%.
• Dallas. No state income tax. HST 13% becomes sales tax 8.25%. Property tax on an $800,000 home around $14,000 to $16,000 before homestead.

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

"Texas imposes a 6.25 percent state sales and use tax on all retail sales, leases and rentals of most goods, as well as taxable services. Local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) can also impose up to 2 percent sales and use tax for a maximum combined rate of 8.25 percent." — Texas Comptroller of Public Accounts, Sales and Use Tax, https://comptroller.texas.gov/taxes/sales/

There are 5 Ontario income tax brackets and 5 corresponding tax rates. — Government of Ontario, Personal income tax, https://data.ontario.ca/dataset/personal-income-tax-rates-and-credits

Practitioner note

Ontario-to-Texas relocations are usually employer-driven and tax-equalized, and the equalization calculation is where we most often find money left on the table: a hypothetical Ontario tax that ignores the deemed disposition, or a Texas "state tax" line that should be zero. We reconcile the settlement against the real returns every time.

See also: Weighing Florida instead? See the Canada-to-Florida guide.

Next step

Fairlight prepares the Ontario departure return, the corporate wind-up where needed, the equalization reconciliation, and the first-year US return for Texas clients. See cross-border pricing or book a call.