Quebec to Texas: The TP-1, the Biggest Rate Drop in Canada, and Texas Property Tax

Quebec to Texas is the largest income tax rate drop a Canadian can make: Quebec's combined top rate of about 53.3% becomes a federal-only 37%. Montreal's aerospace and AI talent goes to Dallas, Houston, and Austin; Quebec energy professionals go to Houston; and cybersecurity staff go to San Antonio. The price is a departure year through three authorities and a Texas property tax bill.

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.
• Texas has no state income tax; US tax is federal only.
• Quebec's 14.975% combined GST and QST becomes 8.25% sales tax in the major Texas cities.
• Texas property tax runs 1.6% to 2.2%; file the homestead application after you move in. 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. QPP paid later to a Texas resident is taxable only in the US. A Montreal professional corporation is deemed sold, loses CCPC status, becomes a US controlled foreign corporation, and needs a Quebec corporate return closed as well as a federal one.

Texas's side

No income tax; property tax at 1.6% to 2.2% effective, with a homestead exemption on school district taxable value and a 10% annual appraisal cap; 8.25% sales tax in Houston, Dallas, Austin, and San Antonio; franchise tax on businesses above a multi-million-dollar revenue threshold; no estate tax; strong homestead creditor protection.

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.

Who makes this move

Montreal aerospace and AI engineers to Dallas and Austin, Quebec energy staff to Houston, Montreal cybersecurity talent to San Antonio, and Quebec corporate staff relocating with employers to the Dallas-Fort Worth corridor.

Worked example

A Montreal aerospace engineer moves to Dallas on June 30 with $260,000 of unrealized gain in a non-registered account, $500,000 in an RRSP, and a Brossard home sold in the departure year.

• Departure tax. $260,000 gain, $130,000 taxable, at about 53.3%: roughly $69,000 across the T1 and TP-1.
• Home. Sold as a resident under the principal residence exemption on both returns.
• RRSP. No tax on departure; periodic withdrawals later at 15%.
• Dallas. No state income tax. Sales tax 14.975% becomes 8.25%. Property tax on a $700,000 home around $12,000 to $14,000 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

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/

"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/

Practitioner note

The Quebec-to-Texas file has the largest gap between what the client expects (a 16-point tax cut) and what the departure year costs (three authorities, a deemed disposition at 53.3%, and a corporation to close). The cut is real from year two. Year one is a project.

See also: Weighing Florida instead? See the Canada-to-Florida guide.

Next step

Fairlight prepares the T1, the TP-1, the corporate wind-up where needed, and the first-year US return for Texas clients. See cross-border pricing or book a call.