Toronto to Austin: The Tech Corridor, the RRSP, and Zero State Income Tax

Toronto and Waterloo send more tech workers to Austin than to any Texas city, and the tax picture is one of the cleanest on the map: Ontario's combined top rate of about 53.5% becomes a federal-only 37%, with no Texas income tax at any level. The planning is on the Ontario side (departure tax, the Toronto home, equity) and on the Austin property tax bill.

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.
• Texas has no state income tax; US tax is federal only.
• 13% HST becomes 8.25% sales tax in Austin.
• Travis County property tax runs about 1.8% to 2%; file the homestead application after you move in.
• OHIP ends on permanent departure. Keeping the Toronto home means NR6, Section 216, and the Vacant Home Tax if empty.

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 pensions are excluded. Report on Form T1243, list holdings on Form T1161 if the total exceeds $25,000, and post security under Form T1244 for illiquid assets. The Toronto home: sell it, rent it under NR6 and Section 216, or face the Vacant Home Tax.

Austin's side

No income tax; property tax around 1.8% to 2% effective with a homestead exemption and a 10% annual appraisal cap; 8.25% sales tax; no estate tax.

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.

Equity

RSUs vesting after the move are split by working days between Canada and the US; no Texas layer. Both payrolls may withhold on the full amount; the excess is recoverable on the first-year returns.

Who makes this move

Toronto and Waterloo software engineers to Austin's large tech employers and startups, Toronto fintech staff to Austin's payments and enterprise software firms, and Ontario hardware engineers to the semiconductor and manufacturing boom around the city.

Worked example

A Waterloo software engineer moves to Austin on April 30 with $250,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, RSUs vesting quarterly after the move, and a Kitchener house sold in the departure year.

• Departure tax. $250,000 gain, $125,000 taxable, at about 53.5%: roughly $67,000.
• House. Sold as a resident under the principal residence exemption.
• RSUs. Vests split by working days; no Texas layer.
• RRSP. No tax on departure; periodic withdrawals later at 15%.
• Austin. No state income tax. HST 13% becomes sales tax 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

"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/

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

Toronto-to-Austin is the file where the TN visa question comes up most: many Ontario tech workers arrive on TN status, which is non-immigrant, and the substantial presence test rather than a green card sets the US residency start. Arrive by mid-year and the first return is dual-status; arrive late and it may be non-resident for the arrival year.

See also: Weighing Florida instead? See the Canada-to-Florida guide, or the same city's Toronto to Miami guide.

Next step

Fairlight prepares the Ontario departure return, the property filings, and the first-year US return for Austin clients. See cross-border pricing or book a call.