Toronto to Seattle: Fintech, No Income Tax, and the Capital Gains Excise

Toronto's fintech and bank-technology talent lands at Amazon, Microsoft, and Seattle's payments and cloud firms, and the rate drop on salary is large: Ontario's combined top rate of about 53.5% becomes a federal-only 37%. Equity is the exception: Washington's capital gains excise applies to large stock sales.

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.
• Washington has no income tax on wages or ordinary investment income.
• Washington taxes long-term capital gains above roughly $270,000 a year at 7%, plus 2.9% above $1 million.
• 13% HST becomes about 10.35% sales tax in Seattle.
• OHIP ends on permanent departure. Keeping the Toronto home means NR6, Section 216, and the Vacant Home Tax if empty. Washington's estate tax exemption is about $3 million.

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.

Seattle's side

No state income tax on wages or ordinary investment income; a 7% excise on long-term capital gains above roughly $270,000 a year (indexed), plus 2.9% on gains above $1 million, with exemptions for real estate and retirement accounts but not stock or RSU sales; sales tax about 10.35% in Seattle; B&O gross receipts tax on businesses and consultants; property tax near 1% in King County; estate tax with an exemption near $3 million and rates to 35%.

The RRSP in Washington

Untouched on departure, federally deferred under the treaty, no state income tax to break the deferral, and exempt from the capital gains excise as a retirement account. Withdrawals face 25% Canadian withholding on lump sums, 15% on periodic RRIF payments within the treaty limit, with a US foreign tax credit.

RSUs and the excise

Vests are ordinary income, split between Canada and the US by working days, and not subject to the excise. Sales of vested shares are capital transactions: a large sale in one year can cross the threshold and trigger the 7%. Sell in tranches, or realize gains in Canada before departure.

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 Amazon, Microsoft, and the Seattle startup scene, Toronto fintech and bank-technology staff to Seattle's cloud and payments firms, and Ontario aerospace engineers to Boeing.

Worked example

A Waterloo software engineer moves to Seattle on April 30 with $250,000 of unrealized gain in a non-registered account, $150,000 of vested employer shares with a $40,000 cost base, $400,000 in an RRSP, and a Kitchener house sold in the departure year.

• Departure tax. $250,000 plus $110,000 of gains, $180,000 taxable, at about 53.5%: roughly $96,000.
• House. Sold as a resident under the principal residence exemption.
• RRSP. No tax on departure; exempt from the excise.
• Post-move share sales. Gains above the threshold face the 7% excise. Sell in tranches.
• Seattle. No state income tax. HST 13% becomes sales tax 10.35%.

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

Washington's capital gains tax is "a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets." — Washington State Department of Revenue, Capital gains tax, https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax

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-Seattle files are equity files. The salary side is a clean cut; the RSU side needs a sale schedule mapped against Washington's annual threshold, built before the move.

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 equity timing plan, and the first-year US return for Seattle-area clients. See cross-border pricing or book a call.