Toronto to San Francisco: RRSPs, RSUs, and a Lateral Move on Tax

Toronto and Waterloo to the Bay Area is the busiest Canadian tech corridor, and the tax picture is a lateral move: Ontario's combined top rate of about 53.5% becomes about 50.3% in California. The traps are the RRSP, which California taxes annually, and RSUs granted in Toronto that vest in California, which three authorities each want a share of.

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 8.625% sales tax in San Francisco, 9.125% or more on the Peninsula.
• 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 Francisco'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; 8.625% sales tax in San Francisco, 9.125% to 9.375% on the Peninsula and in the South Bay; 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.

RSUs and California sourcing

RSUs granted in Canada that vest after the move are split between Canada and the US by working days over the vesting period, and California sources its share by California working days as well. Both payrolls may withhold on the full amount. Because California taxes the gain on a later sale at ordinary rates, the decision to hold or sell vested shares is a California decision as much as a federal one.

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 and Waterloo software engineers to the Bay Area's technology companies, Toronto AI researchers to the region's AI labs, Toronto founders relocating startups to the Bay Area, and Bay Street finance professionals to the Bay Area's venture and asset management firms.

Worked example

A Toronto software engineer moves to San Francisco on July 1 with $300,000 of unrealized gain in a non-registered account, $500,000 in an RRSP producing about $15,000 a year of income, RSUs granted in Toronto vesting quarterly after the move, and a Toronto condo sold in the departure year.

• Departure tax. $300,000 gain, $150,000 taxable, at about 53.5%: roughly $80,000. Cheaper than California's ordinary-rate treatment later.
• RRSP. Federally deferred. California taxes the $15,000 annual income; restructuring reduces it.
• RSUs. Each vest split by working days between Canada, US federal, and California; both payrolls may withhold on the full amount.
• Condo. Sold as a resident under the principal residence exemption.
• San Francisco. Combined top rate about 50.3%. HST 13% becomes sales tax 8.625%.

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-Bay Area is the corridor where RSU sourcing goes wrong most often: the Canadian employer withholds on the full vest, the US employer withholds on the full vest, and California withholds on the full vest. The excess is recoverable, but only with a working-day schedule built before the first post-move vest.

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, the RSU sourcing schedule, and the first-year federal and California returns for Bay Area clients. See cross-border pricing or book a call.