Ottawa to Columbus: Cybersecurity, Finance, and Ohio's Flat Tax Plus City Tax

Columbus's banks and insurers hire cybersecurity, risk, and technology professionals in volume, and Ottawa's federal workforce produces them. Battelle and Ohio State draw research talent as well. The move is a large tax cut: Ontario's combined top rate of about 53.5% becomes about 42% in Columbus. The Ontario side carries the departure tax, the OHIP wind-down, and any federal pension.

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.
• Ohio's flat 2.75% state tax plus Columbus's 2.5% city tax, about 5.25% combined.
• A Canadian public service pension paid to an Ohio resident is taxed federally with Canadian withholding capped at 15% under the treaty, and by Ohio with a retirement income credit; municipal tax generally does not apply.
• 13% HST becomes 7.5% sales tax.
• 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 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.

The federal pension in Ohio

Under Article XVIII of the treaty, Canadian tax on periodic pension payments to a US resident is capped at 15%; file NR301 before the first post-departure payment. The US taxes the pension federally with a foreign tax credit; Ohio taxes it with a retirement income credit; Columbus municipal tax does not apply to pension income. CPP and OAS are taxable only in the US federally and exempt in Ohio.

Columbus's side

Flat 2.75% state income tax; 2.5% Columbus municipal income tax; 7.5% sales tax in Franklin County; property tax near 1.5% to 2%; no estate tax.

The RRSP in Ohio

Federally deferred under the treaty and deferred for Ohio. Canadian withholding is 25% on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit federally.

Who makes this move

Ottawa cybersecurity engineers to JPMorgan Chase's and Nationwide's security groups, federal IT staff to Columbus's banks and insurers, DND and CSE alumni to Battelle and the region's research employers, and Ottawa academics to Ohio State.

Worked example

An Ottawa cybersecurity engineer moves to Columbus on August 31 with $150,000 of unrealized gain in a non-registered account, $400,000 in an RRSP, and a Kanata home sold in the departure year.

• Departure tax. $150,000 gain, $75,000 taxable, at about 53.5%: roughly $40,000.
• Home. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; federal and Ohio deferral.
• Columbus. Combined top rate about 42%. HST 13% becomes sales tax 7.5%.

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

Ohio's individual income tax rates and brackets are published by the Department of Taxation. — Ohio Department of Taxation, Annual Tax Rates, https://tax.ohio.gov/individual/resources/annual-tax-rates

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

Ohio's municipal tax has a wrinkle for Ottawa movers who live in a suburb and work downtown: Columbus taxes the wages at 2.5%, the home city taxes them again, and the home city's credit for tax paid to Columbus may be partial. We run the two-city calculation before the client picks a suburb.

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 pension withholding paperwork, and the first-year federal, Ohio, and municipal returns. See cross-border pricing or book a call.