Ontario to Washington State: No Income Tax, a Capital Gains Excise, and the Tech Corridor to Seattle

Toronto and Waterloo to Seattle is the Ontario tech corridor that does not go to California. The rate drop is large: Ontario's combined top rate of about 53.5% becomes a federal-only 37% on salary. The catch is equity. Washington's capital gains excise applies to large stock sales, and an Ontario engineer arriving with a concentrated RSU position can find the state taking 7% of a gain it would not have taxed as income.

Key takeaways

• Ontario's roughly 53.5% top rate sets the departure tax. On a $300,000 unrealized gain, about $80,000.
• Washington has no income tax on wages or ordinary investment income.
• Washington taxes long-term capital gains above roughly $270,000 a year at 7%, plus 2.9% above $1 million. Retirement accounts and real estate are exempt; stock and RSU sales are not.
• 13% HST becomes about 10.35% sales tax in Seattle.
• Washington's estate tax exemption is about $3 million. 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 interaction with the excise: a gain realized before departure is taxed once in Ontario at half inclusion. The same gain realized as a Seattle resident is taxed federally at preferential rates and, above the threshold, by Washington at 7% to 9.9%. For large positions, realizing in Ontario or spreading post-move sales across years are the two levers.

The Toronto home is excluded; rent it under NR6 and Section 216, sell it, or face Toronto's Vacant Home Tax.

Washington's side

No income tax; capital gains excise as above; sales tax about 10.35% in Seattle; B&O gross receipts tax on businesses and consultants; property tax near 1% in King County; estate tax with an exemption near $3 million and rates to 35%.

The RRSP in Washington

Untouched on departure, federally deferred under the treaty, no state income tax to break the deferral, and exempt from the capital gains excise as a retirement account. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit.

RSUs and the excise

Vests are ordinary income, split between Canada and the US by working days, and not subject to the excise. Sales of vested shares are capital transactions: a large sale in one year can cross the threshold. Sell in tranches or realize in Ontario before departure.

Who makes this move

Toronto and Waterloo software engineers to Amazon, Microsoft, and the Seattle startup scene; Ontario fintech and bank-technology staff to Seattle's cloud and payments firms; and Ontario aerospace engineers to Boeing.

Worked example

A Waterloo software engineer moves to Seattle on April 30 with $250,000 of unrealized gain in a non-registered account, $150,000 of vested employer shares with a $40,000 cost base, $400,000 in an RRSP, and a Kitchener house sold in the departure year.

• Departure tax. $250,000 plus $110,000 of gains, $180,000 taxable, at about 53.5%: roughly $96,000.
• House. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; exempt from the excise.
• Post-move share sales. Gains above the threshold in any year face the 7% excise. Sell in tranches.
• Seattle. No state income tax. HST 13% becomes sales tax 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

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-Seattle files are equity files. The salary side is a clean cut; the RSU side needs a sale schedule mapped against Washington's annual threshold, built before the move, and revisited each January when the threshold is indexed.

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

Next step

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