Quebec to Michigan: The TP-1, a Flat 4.25%, and the Auto Corridor
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
On this page
Montreal's aerospace and automotive engineering talent has a natural market in Michigan's auto, EV, and autonomous vehicle programs. The tax picture is a large rate drop: Quebec's combined top rate of about 53.3% becomes about 41.25% in most of Michigan, or 43.65% inside Detroit. The departure year runs through Revenu Québec, the CRA, and the IRS.
Key takeaways
- Two Canadian departure returns: the federal T1 and Revenu Québec's TP-1, with matching departure dates.
- Quebec's roughly 53.3% top rate sets the departure tax. On a $300,000 unrealized gain, about $80,000.
- Michigan's flat 4.25% plus Detroit's 2.4% city tax; most suburbs have no city tax.
- Michigan follows the treaty's RRSP deferral.
- Quebec's 14.975% combined GST and QST becomes a flat 6% sales tax. RAMQ ends on departure.
The three-authority departure
The federal deemed disposition applies to non-registered investments, private company shares, crypto, and property outside Canada; Quebec mirrors it. Report on federal Form T1243 (with T1161 if the property list exceeds $25,000) and on the Quebec equivalents. RAMQ ends when you leave Quebec to settle outside Canada. A Montreal condo kept and rented brings NR6 and Section 216 federally plus Quebec equivalents.
Michigan's side
Flat 4.25% state income tax; city income tax of 2.4% in Detroit, 1.5% in Grand Rapids, 1% in most other taxing cities, and none in Ann Arbor, Troy, Novi, or most of Oakland County; 6% sales tax with no local additions; high property tax softened by the Principal Residence Exemption and a taxable-value growth cap; no estate tax.
The RRSP in Michigan
Federally deferred under Article XVIII of the treaty and deferred for Michigan because the state starts from federal AGI. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, a US foreign tax credit federally, and Michigan's 4.25%.
Who makes this move
Montreal aerospace and automotive engineers to the Detroit automakers and suppliers, Quebec AI and robotics talent to the autonomous vehicle programs, and Quebec manufacturing staff to the EV and battery plants.
Worked example
A Montreal aerospace engineer moves to Troy on July 31 with $200,000 of unrealized gain in a non-registered account, $400,000 in an RRSP, and a Laval home sold in the departure year.
- Departure tax. $200,000 gain, $100,000 taxable, at about 53.3%: roughly $53,000 across the T1 and TP-1.
- Home. Sold as a resident under the principal residence exemption on both returns.
- RRSP. No tax on departure; federal and Michigan deferral.
- Michigan. Salary taxed at 4.25% state; Troy has no city tax. Combined top rate about 41.25%. Sales tax 14.975% becomes 6%.
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
Revenu Québec sets out the income tax obligations of individuals who cease to be resident in Québec, including the deemed disposition of property on departure. — Revenu Québec, Leaving Québec, https://www.revenuquebec.ca/en/citizens/your-situation/residence-status-and-tax-obligations/leaving-quebec/
Michigan's individual income tax rate and the list of cities that impose a city income tax are published by the Michigan Department of Treasury. — Michigan Department of Treasury, City Income Tax, https://www.michigan.gov/taxes/citytax
Practitioner note
Quebec-to-Michigan files are straightforward on the US side and detailed on the Canadian side. The TP-1 must carry the same departure date as the T1, and a rented Montreal condo needs Quebec rental filings alongside the federal NR6 and Section 216. We prepare both sides together.
See also: Weighing Florida instead? See the Canada-to-Florida guide.
Next step
Fairlight prepares the T1, the TP-1, and the first-year federal, Michigan, and city returns. See cross-border pricing or book a call.
Cross-border taxes, handled in one place
U.S. and Canadian filings prepared together by our U.S. and Canadian Tax Desks.
Book a free fit call