Ottawa to Tampa: The MacDill Pipeline and a Federal Pension in a No-Tax State

MacDill Air Force Base in Tampa hosts US Central Command and Special Operations Command, and the contractor ecosystem around it recruits from the same pool as Ottawa's defence and intelligence community. The Ottawa-to-Tampa file is a defence contractor with a federal pension in the background, an Ontario departure return in the foreground, and a security clearance that dictates the immigration path.

Key takeaways

• Ontario's combined top rate is about 53.5%, including the provincial surtax. Departure tax on a $300,000 unrealized gain is roughly $80,000.
• A Canadian public service pension paid to a Florida resident is taxed in the US with Canadian withholding capped at 15% under the treaty once NR301 is filed.
• OHIP ends on permanent departure.
• Ontario's 13% HST becomes 7.5% sales tax in Hillsborough County.
• Tampa has no city income tax; Florida has no state income tax.

Leaving Ontario

Departure tax is a deemed sale of non-registered investments, private company shares, crypto, and foreign property at fair market value. Ontario real estate, RRSPs, TFSAs, and registered pensions are excluded. Report on Form T1243 and list property on Form T1161 if it exceeds $25,000.

The Ontario surtax applies to provincial tax above two thresholds and is part of what pushes the combined top rate to about 53.5%. It ends on departure.

The federal pension

Under Article XVIII of the treaty, a Canadian pension paid to a US resident may be taxed in Canada, but the tax on periodic payments is capped at 15%. Canada's default Part XIII withholding is 25%; file NR301 with the pension centre before the first post-departure payment. The US taxes the pension as ordinary income with a foreign tax credit for the 15%. Florida adds nothing.

CPP and OAS are taxable only in the US under the treaty, and the OAS clawback does not apply.

Clearances and the residency start

Contractor roles supporting MacDill commonly 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. The Canadian departure date should be coordinated with that date.

Tampa's side

Florida has no personal income tax and no estate tax; Tampa has no municipal income tax. Sales tax is 7.5% in Hillsborough County (7% in Pinellas). Property tax is higher than Ottawa's on a like-for-like home; homestead (own and occupy as your permanent residence on January 1, apply by March 1) takes up to $50,000 off assessed value and caps annual increases at 3%. Documentary stamp tax on the deed is 0.7%.

The RRSP is untouched on departure and tax-deferred in the US under the treaty. Periodic RRIF withdrawals within the treaty limit face 15% Canadian withholding, lump sums 25%, with a US foreign tax credit either way.

Worked example

A former CSE analyst and spouse leave Ottawa on September 30 for a contractor role near MacDill, carrying a $35,000-a-year public service pension, $120,000 of unrealized gain in a non-registered account, $500,000 in RRSPs, and a Barrhaven home sold in the departure year.

• Departure tax. $120,000 gain, $60,000 taxable, at about 53.5%: roughly $32,000.
• Pension. NR301 filed; 15% Canadian withholding; taxed in the US with a foreign tax credit.
• RRSP. No tax on departure; RRIF conversion and periodic withdrawals at 15%.
• Home. Sold as a resident under the principal residence exemption.
• Tampa. No state or city income tax. HST 13% becomes sales tax 7.5%.

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

"No tax upon estates or inheritances or upon the income of natural persons who are residents or citizens of the state shall be levied by the state, or under its authority." — Florida Constitution, Article VII, Section 5(a), http://www.leg.state.fl.us/statutes/index.cfm?submenu=3#A7S05

Practitioner note

Defence files have an extra piece of paperwork most tax preparers never see: the clearance application asks about foreign financial interests, and a Canadian pension, RRSP, and bank accounts all have to be disclosed consistently with what appears on the FBAR and Form 8938. We keep the two disclosures reconciled, because an inconsistency between them is the kind of thing that stalls a clearance.

See also: Ottawa to Miami and Ottawa to Orlando.

Next step

Fairlight prepares the Ontario departure return, the pension withholding paperwork, and the first-year US return for Tampa Bay clients. See cross-border pricing or book a call.