Toronto to Denver: The Outdoor-Tech Corridor and Colorado's Flat 4.4%

Toronto tech workers who want mountains choose Denver and Boulder, and the tax picture rewards them: Ontario's combined top rate of about 53.5% becomes about 41.4% in Colorado, with property tax among the lowest in the US. The planning is on the Ontario side: the departure tax, the Toronto home, and equity.

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.
• Colorado's flat 4.4%; Denver's Occupational Privilege Tax is a flat monthly amount.
• Colorado follows the treaty's RRSP deferral.
• 13% HST becomes 8.81% sales tax in Denver.
• 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.

Denver's side

Flat 4.4% state income tax (TABOR surplus years can temporarily lower it); Denver's Occupational Privilege Tax is a flat few dollars a month rather than a percentage; 8.81% sales tax in the City of Denver; property tax among the lowest in the US at roughly 0.5% effective; no estate tax. Colorado also subtracts up to $24,000 of pension and annuity income for taxpayers 65 and older ($20,000 from 55 to 64), which covers RRIF and CPP income.

The RRSP in Colorado

Federally deferred under Article XVIII of the treaty and deferred for Colorado because the state starts from federal taxable income. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, a US foreign tax credit federally, and Colorado's flat rate after the pension subtraction.

Equity

RSUs vesting after the move are split by working days between Canada and the US; Colorado taxes its share at 4.4%. Both payrolls may withhold on the full amount.

Who makes this move

Toronto software engineers to Denver and Boulder's tech employers, Ontario aerospace engineers to Colorado's space companies, Toronto finance professionals to Denver's financial services firms, and Ontario outdoor-industry staff to Colorado's recreation brands.

Worked example

A Toronto software engineer moves to Boulder on May 31 with $220,000 of unrealized gain in a non-registered account, $450,000 in an RRSP, RSUs vesting after the move, and a Toronto condo sold in the departure year.

• Departure tax. $220,000 gain, $110,000 taxable, at about 53.5%: roughly $59,000.
• Condo. Sold as a resident under the principal residence exemption.
• RSUs. Vests split by working days; Colorado taxes its share.
• RRSP. No tax on departure; federal and Colorado deferral.
• Boulder. Combined top rate about 41.4%. HST 13% becomes sales tax 9%. Property tax on an $850,000 home around $4,500.

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

The subtraction is generally limited to $20,000 each year or, for individuals age 65 or older, $24,000. — Colorado Department of Revenue, Social Security, Pensions and Annuities, https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities

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-Colorado is the corridor with the largest property tax relief: a Boulder home carries a bill a third of what a comparable Toronto home does. The income tax cut is real too, but the property tax is what clients notice first.

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 federal and Colorado returns for Denver and Boulder clients. See cross-border pricing or book a call.