Ottawa to New York: Policy, the UN, and a Nearly Lateral Move on Tax

Ottawa's policy professionals, diplomats, and consultants have a natural market in New York's UN agencies, think tanks, and consulting offices. The tax picture is nearly lateral: Ontario's combined top rate of about 53.5% becomes about 51% for a Manhattan resident. The planning value is in the RRSP, the estate, and the treatment of international organization salaries.

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.
• New York State's practical top rate is 9.65% and New York City adds up to 3.876%; combined with federal, about 51% in the city.
• UN and international organization salaries may be exempt from US federal tax for non-citizens under the organization's charter, but state and city treatment varies; take the position deliberately.
• A Canadian public service pension paid to a New York resident is taxed federally with Canadian withholding capped at 15% under the treaty, and by New York State and City.
• 13% HST becomes 8.875% 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. Because New York taxes capital gains as ordinary income, realizing gains before departure at Ontario's half inclusion is cheaper. The Ontario surtax ends on departure.

The federal pension and international organization pay

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, and New York State and City tax it as well. Salaries from the UN and certain international organizations are exempt from US federal income tax for non-US citizens under the organizations' founding instruments; New York's treatment depends on the organization and the visa, and the position should be documented.

New York's side

State brackets from 4% to 10.9% (the top rate only above $25 million; most high earners sit at 9.65% or 6.85%); New York City resident tax from 3.078% to 3.876%; capital gains at ordinary rates; statutory residency at 183 days plus a permanent place of abode, with aggressive audits; 8.875% sales tax in the city; estate tax with an exemption near $7.35 million and a cliff at 105% of the exemption. Westchester, Long Island, New Jersey, and Connecticut avoid the city tax but not the state tax (or carry their own).

The RRSP in New York

Federally deferred under Article XVIII of the treaty. New York has historically declined to follow federal treaty exclusions in some contexts; whether RRSP growth must be added back on the New York return is a position to take with the guidance in hand. If it must, restructure the account toward low-yield holdings or draw it down before departure.

Who makes this move

Ottawa policy professionals to UN agencies and international organizations, Global Affairs and diplomatic staff to New York postings, Ottawa consultants to the New York offices of the large firms, and federal researchers to New York's think tanks and universities.

Worked example

An Ottawa policy analyst moves to Manhattan on August 31 for a UN agency role with $150,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, and a Glebe 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.
• UN salary. Federal exemption position documented; New York State and City treatment reviewed.
• RRSP. Federally deferred; New York position documented.
• New York. HST 13% becomes sales tax 8.875%.

Official sources

"Pensions may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if a resident of the other Contracting State is the beneficial owner of a periodic pension payment, the tax so charged shall not exceed 15 per cent of the gross amount of such payment." — Canada-United States Tax Convention, Article XVIII(2)(a), https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html

"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

New York State personal income tax rates and the New York City resident tax rates are published by the Department of Taxation and Finance. — New York State Department of Taxation and Finance, Tax rates and tables, https://www.tax.ny.gov/pit/file/tax-tables/

Practitioner note

Ottawa-to-New York files for international organization staff turn on the visa and the organization: a G-4 visa holder at the UN has a different federal and state position from a consultant at a think tank. We document the exemption position in the first-year file.

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 international organization salary position, and the first-year federal, New York State, and New York City returns. See cross-border pricing or book a call.