Ottawa to Austin: Defence Tech, the RRSP, and One of the Largest Rate Drops on the Map

Austin's defence-technology and government-technology sector recruits directly from Ottawa's cybersecurity and federal IT workforce. The move is a 16-point rate drop on top-bracket income: Ontario's combined top rate of about 53.5% becomes a federal-only 37%. The Ontario side carries the departure tax and the OHIP wind-down; the Austin side carries property tax and, for many, a security clearance that dictates the immigration path.

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 Austin.
• Travis County property tax runs about 1.8% to 2%; file the homestead application after you move in.
• OHIP ends on permanent departure. Defence roles may require a green card, which sets the US residency start.

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 registered pensions are excluded. Report on Form T1243, list holdings on Form T1161 if the total exceeds $25,000. The Ontario surtax ends on departure. OHIP ends on permanent departure.

A federal pension, if any, is taxed in the US with Canadian withholding capped at 15% under the treaty once NR301 is filed; Texas adds nothing.

Austin's side

No income tax; property tax around 1.8% to 2% effective with a homestead exemption and a 10% annual appraisal cap; 8.25% sales tax; no estate tax.

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.

Clearances and the residency start

Many Austin defence-tech roles require US citizenship or a green card. A sponsored green card sets the US residency start on its issue date unless the substantial presence test was already met; coordinate the Canadian departure date with it.

Who makes this move

Ottawa cybersecurity engineers to Austin's defence-tech firms, federal IT and policy staff to gov-tech startups, DND and CSE alumni to the contractor base, and Ottawa software developers to Austin's enterprise employers.

Worked example

An Ottawa cybersecurity engineer moves to Austin on August 31 with $160,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, and an Orleans home sold in the departure year.

• Departure tax. $160,000 gain, $80,000 taxable, at about 53.5%: roughly $43,000.
• Home. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; periodic withdrawals later at 15%.
• Austin. No state income tax. HST 13% becomes sales tax 8.25%. Property tax on a $600,000 home around $11,000 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

Ottawa-to-Austin clients with a clearance in progress have two dates that must agree: the Canadian departure date and the green card issue date. When they diverge, income in the gap can be taxed by both countries or by neither. We reconcile them before the offer is signed.

See also: Weighing Florida instead? See the Canada-to-Florida guide, or the same city's Ottawa to Miami guide.

Next step

Fairlight prepares the Ontario departure return, the residency-date reconciliation, and the first-year US return for Austin clients. See cross-border pricing or book a call.