Toronto to Philadelphia: Pharma, Finance, and the City Wage Tax

Philadelphia's life sciences corridor, its finance and insurance employers, and Comcast's technology operations recruit Toronto's pharma, finance, and tech professionals. The move is a large tax cut: Ontario's combined top rate of about 53.5% becomes about 43.8% inside Philadelphia or about 41% in the suburbs.

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.
• Pennsylvania's flat 3.07% plus Philadelphia's roughly 3.74% resident wage tax; suburbs charge about 1%.
• Pennsylvania exempts most retirement income after retirement age.
• 13% HST becomes 8% sales tax in Philadelphia, 6% in the suburbs.
• 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 under the principal residence exemption, rent it under NR6 and Section 216, or face Toronto's Vacant Home Tax if it sits empty. OHIP ends on permanent departure.

Philadelphia's side

Pennsylvania's flat 3.07% state income tax; Philadelphia's Wage Tax of about 3.74% on residents (about 3.43% on non-residents who work in the city), which most suburbs replace with a 1% local earned income tax; 8% sales tax in Philadelphia (6% state plus 2% city), 6% in most suburbs; property tax near 1.4% effective; no estate tax, but Pennsylvania's inheritance tax applies at 4.5% to lineal heirs, 12% to siblings, and 15% to others, with a spousal exemption.

The RRSP in Pennsylvania

Federally deferred under Article XVIII of the treaty. Pennsylvania taxes eight classes of income rather than starting from federal AGI, and it does not tax the undistributed earnings of retirement plans, which supports deferral. Pennsylvania also exempts most retirement income received after retirement age, which can cover RRIF withdrawals; document the position in the first-year file. Canadian withholding is 25% on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit federally.

Equity

RSUs vesting after the move are split by working days between Canada and the US; the state and any local authority tax their share. Both payrolls may withhold on the full amount; the excess is recoverable on the first-year returns.

Who makes this move

Toronto pharma and biotech professionals to the Philadelphia life sciences corridor, Bay Street finance staff to Vanguard and the region's banks and insurers, Toronto software engineers to Comcast and Philadelphia's fintech employers, and Ontario academics to Penn.

Worked example

A Toronto pharma manager moves to Philadelphia on June 30 with $220,000 of unrealized gain in a non-registered account, $500,000 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; Pennsylvania and Philadelphia tax their share.
• RRSP. Federally deferred; Pennsylvania position documented.
• Philadelphia. State 3.07% plus wage tax about 3.74%. Combined top rate about 43.8%. HST 13% becomes sales tax 8%.

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

Pennsylvania personal income tax is levied at the rate of 3.07 percent. — Pennsylvania Department of Revenue, Personal Income Tax, https://www.pa.gov/en/agencies/revenue/resources/tax-types-and-information/personal-income-tax.html

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-Philadelphia clients decide the wage tax with their address: about 3.74% inside the city, about 1% in Montgomery or Delaware County. On a $250,000 salary that is roughly $6,900 a year. We run both before the client commits.

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, Pennsylvania, and local returns for Philadelphia clients. See cross-border pricing or book a call.