Moving from Canada to the U.S.: tax planning before you go

Most expensive cross-border mistakes are made before the move, not after. Decisions about when to leave, what to sell, and which accounts to wind down are far cheaper to make while you are still a Canadian resident. Start planning at least three months out — longer if you own a business or complex investments.

Departure tax: Canada's exit bill

When you cease to be a Canadian tax resident, you are generally deemed to have disposed of most of your property at fair market value — the departure tax. Taxable gains crystallize that day, even though nothing was sold. Some property is protected (registered plans such as RRSPs, Canadian real estate you continue to own, certain pension rights), and elections can defer payment by posting security. The planning questions are what to realize before leaving, what to hold, and how to fund any departure liability.

Accounts that change meaning at the border

• TFSA — the tax-free status ends for U.S. purposes once you are a U.S. resident (and while you remain a U.S. citizen, it never had U.S. protection). Growth becomes taxable in the U.S., and the underlying funds can create PFIC reporting. Most movers should wind TFSAs down before becoming a U.S. resident.
• RESP — treated as a foreign trust for U.S. purposes with Form 3520/3520-A exposure. Options exist but must be evaluated before the move.
• RRSP/RRIF — generally safe: the treaty preserves deferral for U.S. residents. Do not reflexively collapse an RRSP at the border — that can create a large unnecessary tax bill.
• Canadian mutual funds and ETFs — likely PFICs in U.S. hands; consider realizing or restructuring before the move.
• 401(k) / IRA — covered by the treaty as well; withdrawals after the move involve Canada/U.S. withholding coordination.

Timing and residency

Your residency start date in the U.S. (green card or substantial presence) and your emigration date from Canada determine which country taxes what, and when. Choosing to land late in a calendar year, or using the first-year elections to split income between the two systems, can materially change first-year tax. Cutting residency ties in Canada — home, spouse, provincial health coverage, driver's licence — must be done consistently with the date you report.

The first dual year

Year one typically involves a Canadian part-year return (with departure tax), a U.S. dual-status or first-year return, treaty elections, and possibly state returns. Getting these coordinated is where double taxation is actually prevented.

We plan the full sequence — pre-move restructuring, residency analysis, departure tax projection, and the first-year filings — ideally before the moving truck is booked.