Toronto to Boston: Bay Street to State Street, and Massachusetts's Flat 5%

Toronto's finance and technology sectors map directly onto Boston's: State Street and Fidelity for Bay Street, Kendall Square for the MaRS and University of Toronto biotech community, and the Seaport's software firms for Toronto's tech workers. The move is a large tax cut: Ontario's combined top rate of about 53.5% becomes about 42% in Massachusetts, or 46% above the millionaire's surtax threshold. Massachusetts has its own views on the RRSP and the estate.

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.
• Massachusetts taxes most income at a flat 5%, plus a 4% surtax above roughly $1.1 million; short-term gains at 8.5%.
• Massachusetts's conformity to the treaty's RRSP deferral should be confirmed.
• 13% HST becomes 6.25% sales tax.
• Massachusetts's estate tax applies above $2 million. 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.

Boston's side

Flat 5% on most income with a 4% surtax above the indexed threshold; short-term gains at 8.5%; no city income tax; 6.25% sales tax; property tax near 1% to 1.2% with Boston's residential exemption for owner-occupants; estate tax above $2 million with rates to 16%.

The RRSP in Massachusetts

Federally deferred under Article XVIII of the treaty. Massachusetts applies its own rules to treaty-exempt income; confirm the RRSP position before assuming state deferral, and if the state does not defer, restructure or draw down before departure.

Deferred compensation

Bay Street compensation carries deferred bonuses and restricted units. Vests after the move are split by working days between Canada and the US; Massachusetts taxes its share at 5% (or 9% above the surtax threshold). Both payrolls may withhold on the full amount.

Who makes this move

Bay Street asset managers and analysts to State Street, Fidelity, and Boston's investment firms; Toronto biotech researchers to Kendall Square; Toronto software engineers to the Seaport's tech employers; and University of Toronto academics to Boston's universities.

Worked example

A Toronto portfolio manager moves to Boston on June 30 with $300,000 of unrealized gain in a non-registered account, $700,000 in an RRSP, deferred compensation vesting over three years, and a Toronto house sold in the departure year.

• Departure tax. $300,000 gain, $150,000 taxable, at about 53.5%: roughly $80,000.
• House. Sold as a resident under the principal residence exemption.
• Deferred comp. Split by working days; Massachusetts taxes its share.
• RRSP. Federally deferred; Massachusetts position documented.
• Boston. Combined top rate about 42% (46% above the surtax threshold). HST 13% becomes sales tax 6.25%.

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

Only the portion of a taxpayer's taxable income that exceeds the surtax threshold for a tax year will be subject to the 4% surtax; the threshold for Tax year 2026 is $1,107,750. — Massachusetts Department of Revenue, 4% Surtax on Taxable Income, https://www.mass.gov/info-details/massachusetts-4-surtax-on-taxable-income

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

The Bay Street-to-Boston file has one number most clients have not seen: Massachusetts's 8.5% rate on short-term capital gains, which catches active traders and anyone with a portfolio turned over in under a year. Ontario taxed those gains at half inclusion; Massachusetts taxes them at a rate above its ordinary income rate. We flag it before the first post-move trade.

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 RRSP position, and the first-year federal and Massachusetts returns. See cross-border pricing or book a call.