Toronto to Miami: Ontario Surtax Out, Florida Homestead In

Toronto to Miami is the busiest Canadian city corridor into South Florida. It carries Bay Street finance professionals moving to Brickell's hedge fund and private credit cluster, tech workers on TN and L-1 visas, business owners relocating for the Latin American market, and a large stream of Rosedale-to-Bal-Harbour retirees who have wintered in Florida for a decade and are finally going permanent. The rate drop is real: Ontario's combined top marginal rate is about 53.5%, and Miami has no state or city income tax. The planning is in three places: the departure date, the Toronto home, and the day count.

Key takeaways

• Ontario's top combined rate of about 53.5% (including the provincial surtax) sets the departure tax. On a $300,000 unrealized gain, roughly $80,000.
• The Toronto home is not caught by departure tax, but keeping it means NR6, Section 216, and eventually Section 116, plus Toronto's Vacant Home Tax if it sits empty.
• 13% HST becomes 7% sales tax in Miami-Dade.
• Florida has no state income tax, so RRSP, RRIF, and CPP/OAS income are taxed federally only.
• Most Toronto snowbirds meet the US substantial presence test before their move date. Count days for the last three years first.

The Ontario departure

Departure tax is a deemed sale of non-registered investments, private company shares, crypto, and foreign property at fair market value. 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 consider security under Form T1244 for illiquid assets.

Ontario's provincial surtax pushes the combined top rate to about 53.5%. It applies to provincial tax above two thresholds and is one of the reasons Ontario's effective exit rate is at the high end. Pre-departure loss harvesting and the choice of departure month are worth more here than in Alberta.

OHIP ends on permanent departure. Confirm the date with ServiceOntario and start US coverage the same month.

The Toronto home

Three paths:

• Sell before or in the departure year. Principal residence exemption covers the gain. Cleanest option.
• Rent it. File NR6 before the first rent payment so withholding is on net rather than 25% of gross; file a Section 216 return annually. When you eventually sell, Section 116 clearance applies and the exemption is prorated for the years you lived there.
• Leave it empty. Toronto's Vacant Home Tax applies to residential properties not occupied for more than six months in a year, and the federal Underused Housing Tax can apply to a non-resident, non-citizen owner. Empty is the expensive option.

Equity compensation

Toronto's finance and tech movers usually carry RSUs, options, or deferred bonuses. Under the treaty, employment income is sourced to where the work was performed; a grant vesting after the move is split by working days in each country over the vesting period. Both payrolls may withhold on the full amount. The over-withholding is recoverable on the first-year returns.

Miami's side

Florida has no personal income tax, no estate tax, and Miami levies no municipal income tax. The costs:

• Sales tax. 7% in Miami-Dade.
• Property tax. Higher than Toronto's on a like-for-like home. Budget an effective rate in the high 1% range until homestead applies.
• Homestead. Own and occupy as your permanent residence on January 1, apply by March 1. Up to $50,000 off assessed value and a 3% annual cap on assessment increases. Buying in the wrong month costs a year of both.
• Documentary stamp tax. 0.6% of the price on a single-family deed in Miami-Dade.

The RRSP and the snowbird clock

The RRSP is untouched on departure and tax-deferred in the US under Article XVIII of the treaty. Florida has no state income tax, so there is no state to disregard the deferral. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit.

For retirees, the clock matters more than the RRSP. The substantial presence test counts all days this year, one-third of last year's, and one-sixth of the year before. A Toronto snowbird spending 130 days a winter for three years has met it. That means the FBAR, the TFSA problem, and the first US return may all belong to a year before the "move," and the transition is from a Form 8840 closer-connection position to full residency rather than from non-resident to resident.

Worked example

A Toronto couple leaves on June 30 with $300,000 of unrealized gain in a non-registered account, $1 million in RRSPs, a Forest Hill home they sell in the departure year, and RSUs vesting in November.

• Departure tax. $300,000 gain, $150,000 taxable, at about 53.5%: roughly $80,000.
• Home. Sold as a resident under the principal residence exemption. No Section 116, no Vacant Home Tax.
• RSUs. November vest split by U.S. and Canadian working days over the vesting period.
• RRSP. No tax on departure; periodic RRIF withdrawals later at 15%.
• Miami. No state or city income tax. HST 13% becomes sales tax 7%.

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

"You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least: 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that." — Internal Revenue Service, Substantial Presence Test, https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

"A person who, on January 1, has the legal title or beneficial title in equity to real property in this state and who in good faith makes the property his or her permanent residence or the permanent residence of another or others legally or naturally dependent upon him or her, is entitled to an exemption from all taxation, except for assessments for special benefits, up to the assessed valuation of $25,000 on the residence and contiguous real property." — Florida Statutes §196.031(1)(a), http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0100-0199/0196/Sections/0196.031.html

Practitioner note

Toronto files come to us in two shapes. The working professional with a firm departure date needs the corporate and equity work done before the date. The snowbird retiree needs a three-year day count done before anything else, because the answer often moves the first US tax year backward and changes which forms were already late. Both are fixable; both are cheaper early.

Next step

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