Arrival Tax Planning — Moving to Canada
Moving to Canada triggers Canadian tax residency and a deemed acquisition of most assets at fair market value. TYM establishes your Canadian cost basis, optimizes RRSP room, and manages your ongoing US filing obligations if you are a US citizen.
The deemed acquisition on arrival is one of the most beneficial provisions in the Canadian Income Tax Act for new residents — it means you only pay Canadian capital gains tax on appreciation that occurs after your arrival. But maximizing this benefit requires planning before you arrive, not after.
What Happens When You Arrive in Canada
Establishing Canadian tax residency triggers a cascade of tax events that must be managed in the year of arrival and in subsequent years. Each event has specific planning opportunities that are only available if addressed proactively.
Canadian Tax Residency Begins
Date of arrivalYou become a Canadian resident for tax purposes on the date you establish significant residential ties in Canada — typically the date you arrive with the intention to reside. From that date, you are subject to Canadian tax on worldwide income and must file a T1 return for the year of arrival.
Deemed Acquisition at Fair Market Value
ITA §128.1(1)(b)Under ITA §128.1(1)(b), most property you own on the date of arrival is deemed acquired at its fair market value on that date. This establishes your Canadian cost basis — meaning future gains are calculated from the arrival date FMV, not the original purchase price. This is generally beneficial for assets with unrealized gains.
RRSP Contribution Room Begins
18% of prior year earned incomeRRSP contribution room is earned based on Canadian earned income from the prior year. In the year of arrival, you earn RRSP room based on your Canadian earned income for the partial year. TYM advises on the optimal timing of RRSP contributions in the arrival year and subsequent years.
US Filing Obligations Continue (for US Citizens)
Ongoing · US citizenship-based taxationUS citizens who move to Canada do not lose their US filing obligations. They must continue to file Form 1040 annually, report Canadian financial accounts on FBAR and FATCA Form 8938, and make the RRSP treaty election on Form 8833. TYM manages both the Canadian T1 and the US Form 1040 for US citizens in Canada.
US Exit Tax (for Long-Term Residents)
Section 877A · Covered ExpatriatesUS citizens and long-term residents (green card holders for 8+ years) who renounce US citizenship or abandon their green card may be subject to the US exit tax (Section 877A). The exit tax treats all property as sold at FMV on the day before expatriation. TYM advises on exit tax planning for individuals considering renunciation.
Scope Boundaries
Included
- Pre-arrival tax planning and deemed acquisition analysis
- Canadian T1 return for year of arrival (partial-year resident)
- RRSP contribution room analysis and optimization
- TFSA strategy for new Canadian residents
- US dual-status return (Form 1040) for year of arrival
- RRSP treaty election (Form 8833) — initial filing
- Initial FBAR and FATCA filings for Canadian accounts
- Ongoing dual-filing compliance (T1 + Form 1040)
Not Included
- Canadian immigration advice or visa applications
- US exit tax planning for renunciation (available as a separate engagement)
- Canadian real estate purchase or transfer
- Investment management or financial planning
- Legal services
FAQ: Moving to Canada
When do I become a Canadian resident for tax purposes?
You become a Canadian resident for tax purposes when you establish significant residential ties in Canada. The most significant residential ties are a home in Canada and a spouse or dependants in Canada. Secondary ties include Canadian bank accounts, driver's licence, health insurance, and social ties. The CRA's administrative position is that you become a resident on the date you arrive in Canada with the intention to reside, if you have established significant residential ties.
What is the deemed acquisition and why does it matter?
Under ITA §128.1(1)(b), most property you own on the date you become a Canadian resident is deemed acquired at its fair market value on that date. This establishes your Canadian adjusted cost base (ACB) for future capital gains calculations. For assets with unrealized gains, this is beneficial — it means you will only pay Canadian capital gains tax on appreciation that occurs after your arrival in Canada, not on gains that accrued before you arrived.
Can I contribute to an RRSP immediately after moving to Canada?
RRSP contribution room is based on 18% of your prior year's Canadian earned income, up to the annual limit ($31,560 for 2024). In the year of arrival, you earn RRSP room based on your Canadian earned income for the partial year. If you have no prior year Canadian earned income, you will have no RRSP room in the year of arrival — room begins to accumulate based on your first full year of Canadian earned income. TYM advises on the optimal timing of RRSP contributions.
Do I still have to file US taxes after moving to Canada?
If you are a US citizen, yes. The United States taxes on the basis of citizenship, not residency. Moving to Canada does not end your US filing obligations — it creates a permanent dual-filing requirement. You must file Form 1040 with the IRS every year, report Canadian financial accounts on FBAR and FATCA Form 8938, and make the RRSP treaty election on Form 8833. TYM manages both the Canadian T1 and the US Form 1040 for US citizens in Canada.
What is the US exit tax and does it apply to me?
The US exit tax (Section 877A) applies to 'covered expatriates' — US citizens who renounce citizenship, or long-term residents (green card holders for 8+ years) who abandon their green card. A covered expatriate is subject to a mark-to-market tax that treats all property as sold at FMV on the day before expatriation. The exit tax applies if your average annual net income tax for the 5 years before expatriation exceeds a threshold ($201,000 for 2024), or if your net worth exceeds $2 million. TYM advises on exit tax planning for individuals considering renunciation.
Arrival Tax Planning — Toronto & Miami
TYM serves individuals moving to Canada from the United States and other countries from offices in Toronto and Miami. TYM's CPAs are licensed in both Canada (CPA Ontario) and the United States (CPA Florida), enabling seamless coordination of the Canadian arrival filing and the US departure or dual-status filing.
The content on this page is for informational purposes only and does not constitute professional tax advice. Canadian tax residency and arrival tax obligations depend on individual facts and circumstances. Consult a qualified CPA licensed in both Canada and the United States before making any decisions related to Canadian tax residency.
