Toronto to San Diego: Biotech Pay, the RRSP, and California's Annual Inclusion

San Diego's biotech cluster, its wireless and technology sector, and its defence contractors recruit Toronto's life sciences, engineering, and software professionals. The move is a small rate cut: Ontario's combined top rate of about 53.5% becomes about 50.3% in California. The planning is about the RRSP, the pre-departure gain realization, and the Toronto home.

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.
• California's combined top rate is about 50.3%; capital gains at ordinary rates.
• California does not follow the treaty on RRSPs.
• 13% HST becomes 7.75% sales tax in San Diego.
• 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.

San Diego's side

Graduated California state rates to 12.3% plus a 1% surcharge above $1 million, for a combined federal and state top rate near 50.3%; capital gains taxed as ordinary income; 7.75% sales tax in the City of San Diego, among the lowest in California; Proposition 13 property tax at about 1.1% of purchase price with a 2% annual cap; no estate tax; aggressive residency audits; community property.

The RRSP in California

Federally deferred under Article XVIII of the treaty. California does not conform: the Franchise Tax Board taxes the interest, dividends, and realized gains inside the account each year. Before departure, restructure toward growth assets that produce little annual income, draw the account down while still a Canadian resident, or accept the annual inclusion and track California basis.

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 biotech and pharma professionals to the Torrey Pines cluster, Toronto and Waterloo engineers to Qualcomm and San Diego's wireless sector, Ontario defence engineers to the naval and unmanned-systems contractors, and Toronto clinicians to UC San Diego Health.

Worked example

A Toronto biotech manager moves to San Diego on July 1 with $250,000 of unrealized gain in a non-registered account, $500,000 in an RRSP producing about $15,000 a year of income, RSUs vesting after the move, and a Toronto condo sold in the departure year.

• Departure tax. $250,000 gain, $125,000 taxable, at about 53.5%: roughly $67,000. Cheaper than California's ordinary-rate treatment later.
• RRSP. Federally deferred. California taxes the $15,000 annual income; restructuring reduces it.
• Condo. Sold as a resident under the principal residence exemption.
• RSUs. Split by working days between Canada, US federal, and California.
• San Diego. Combined top rate about 50.3%. HST 13% becomes sales tax 7.75%.

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

California does not conform to federal tax treaty provisions; income excluded from federal income under a treaty may be taxable by California. — California Franchise Tax Board, Publication 1031, Guidelines for Determining Resident Status, https://www.ftb.ca.gov/forms/2025/2025-1031-publication.pdf

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-San Diego files have a specific order of operations: RRSP restructuring, then gain realization, then the departure date, then the OHIP end date, then the California residency start. We build the timeline backward from the job start date.

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 restructuring, and the first-year federal and California returns for San Diego clients. See cross-border pricing or book a call.