Whether you are moving from Canada to the US or the other way around, the tax side of a cross-border move is more complicated than most people expect. The year you move is the hardest one to get right because you may owe taxes in both countries for the same period.

Here is a checklist to work through before (or right after) your move.

Before you leave Canada

  • Determine your departure date for tax purposes. CRA considers you a Canadian tax resident until you sever your residential ties (home, spouse in Canada, dependents, bank accounts, driver’s licence, health card).
  • File a final Canadian return as an emigrant. You will report worldwide income up to your departure date and Canadian-source income after that.
  • Report deemed dispositions. When you leave Canada, CRA treats most of your assets as if you sold them on departure day. This can trigger capital gains tax on investments, real estate (other than your principal residence), and other property.
  • Decide what to do with your RRSP and TFSA. You can keep your RRSP after leaving Canada, but contributions will no longer be deductible. Your TFSA stops being tax-sheltered on the US side.
  • Notify CRA of your change in address and residency status.

Before you arrive in the US

  • Get your Social Security Number or ITIN sorted. You will need one to file a US return.
  • Understand your US residency start date. The IRS uses the Substantial Presence Test (183 days over a 3-year period using a weighted formula) or your green card date.
  • Know which state you are moving to. State income tax rules vary widely. Some states (like Florida and Texas) have no income tax. Others (like California and New York) have high rates and aggressive residency rules.
  • Open a US bank account and start tracking income earned in the US separately from Canadian income.

During the move year

  • You will likely file a part-year resident return in Canada and a full-year or part-year return in the US.
  • Apply the Foreign Tax Credit on both sides to avoid double taxation on the same income.
  • Convert all amounts at the correct exchange rates. CRA uses the Bank of Canada annual average rate. The IRS uses the rate on the date of each transaction or the annual average (your choice, but be consistent).
  • If you are keeping Canadian rental property, you must file a Section 216 return in Canada and report the rental income on your US return as well.
  • Do not forget FBAR filing if your Canadian accounts exceed US $10,000 in combined balance.

After the move

  • Update your records with both CRA and the IRS.
  • Review your withholding or instalment payments to make sure you are not underpaying in your new country.
  • Consider whether any tax treaty elections should be made (for example, on RRSP withdrawals).

The bottom line

The move year is where most mistakes happen. You are dealing with two countries, two currencies, and two sets of rules at the same time. A CPA with dual Canada-US credentials can coordinate both returns and make sure you do not pay more than the treaty requires.

L&R Accounting helps clients across Ontario with cross-border relocations. If you are planning a move, start the tax conversation early.

Geetha Srinivasan, CPA (Ontario), CPA (US)
L&R Accounting Services Ltd.