Are you a successful US tech executive considering a move to Canada? Perhaps you’re a Canadian returning home, an American exploring opportunities in Toronto or Vancouver, or an H1B visa holder seeking a more permanent future. The move north is an exciting prospect, but it’s also one of the most significant financial events of your life.
Before you make the leap, it’s critical to look beyond the logistics of moving boxes and consider the complex world of cross-border taxation. For those whose wealth is tied up in stock options and company RSUs, failing to plan can lead to costly and entirely avoidable tax bills.
How can you protect the wealth you’ve worked so hard to build? It starts with understanding the rules of the game.
First, What Does Canada Consider a “Resident”?
The single most important concept to grasp is tax residency. Canada, like the US, taxes its residents on their worldwide income. However, Canada’s definition of a resident might be different than you think. It has little to do with your citizenship and everything to do with your ties to the country.
The Canada Revenue Agency (CRA) will likely consider you a tax resident if you establish significant residential ties.
This is where you must be careful. On the other side of the border, the US, and especially specific States like California, really like to hold on to their taxpayers through their substantial presence test, and removing all residential ties from the US can be just as important as establishing ties to Canada. This is to help you avoid any confusion on the US/Canada tax treaty tie breaker rules and double taxation.
Your Assets Get a Fresh Start—The “Deemed Acquisition” Day.
Here’s some good news. The day you establish these ties is your date of arrival for tax purposes. This date is critical because it triggers a fundamental shift in how your assets are valued, creating a clear line between your financial life in the US and your new one in Canada.
The Canadian government now considers you to have sold and immediately reacquired most of your capital property—like stocks in your personal brokerage account—at the Fair Market Value (FMV). This could result in a step-up or a step-down in basis.
Taxable Canadian property, such as real estate, that you own prior to arrival, does not receive this step-up or step-down.
Why does this matter? This “deemed acquisition” is a powerful tax planning tool because it gives all your assets a new cost basis equal to their Fair Market Value (FMV) on your arrival day.
- Before you move: All the growth that your assets experienced while you were a US resident is taxed only by the US.
- After you arrive: Canada will only tax the future growth that occurs after your arrival date.
By establishing a new, higher cost basis, this rule prevents the CRA from taxing you on gains that occurred before you became a Canadian tax resident. This is a crucial benefit that directly impacts your wealth preservation. You are not taxed on the growth you’ve already accumulated; you are only taxed on the growth you have from the day you land.
The Million-Dollar Question: What About Your RSUs and Stock Options?
The tax treatment of your equity compensation is entirely dependent on timing—specifically, whether it vests or is exercised before or after you become a Canadian resident.
Restricted Stock Units (RSUs)
Think of RSUs as a future promise of shares. The key date is when they vest and become yours.
- If your RSUs vest before you move, the income is taxed in the US. The shares you now own are treated like any other stock and receive the cost basis “bump-up” on your arrival in Canada. This is often the cleanest and most favorable outcome.
- If your RSUs vest after you move, the situation is more complex. The full value at vesting is considered employment income in Canada. However, the Canada-US Tax Treaty allows for the income to be sourced to the days you worked in each country. This means a portion will be taxed in the US and a portion in Canada, requiring you to claim foreign tax credits to prevent being taxed twice on the same income.
Stock Options
This is one area where Canadian tax law can offer a significant advantage.
- Exercising after you move can be highly beneficial. When you exercise your options as a Canadian resident, the “stock option benefit” (the difference between the market price and your exercise price) is included in your income. However, Canada often allows for a 50% stock option deduction. This effectively treats the benefit like a capital gain, cutting the tax bill nearly in half—a benefit that doesn’t exist in the US for regular stock options. Depending on the numbers involved, Alternate Minimum Tax in Canada may reduce the benefit of the stock option deduction. It would be worthwhile in this case to prepare a tax projection before locking in your plan.
- Exercising before you move means you are subject to US tax rules. The shares you acquire then get the cost basis bump-up upon your move to Canada.
- A Warning on US ISOs: Canada does not recognize the special tax-deferred status of US Incentive Stock Options (ISOs). If you exercise an ISO after moving to Canada, you will likely face immediate taxation in Canada, even if the tax is deferred in the US. Furthermore, exercising ISOs while still in the US can trigger the US Alternative Minimum Tax (AMT), a separate tax calculation that needs to be carefully modelled. This tax mismatch can create significant complications and lead you to strategically exercise your ISOs before you move up to Canada.
You Are More Than Your Stock: Other Key Considerations
A strategic cross-border plan must account for your entire financial picture.
- If you are a US Citizen moving to Canada, be aware that you will continue to file a tax return in the US, reporting worldwide income on a US basis, and claiming the foreign tax credits for taxes paid to Canada
- Roth IRA: The Canada-US tax treaty protects the tax-deferred growth in your US retirement accounts like a shield. However, there are critical nuances you must be aware of to avoid costly mistakes. You cannot deduct new contributions to these accounts on your Canadian tax return. Most importantly, distributions from Roth accounts, while tax-free in the US, will not be tax-free in Canada unless a specific election is filed with the Canada Revenue Agency (CRA). Failing to file this election means that all future growth and withdrawals from your Roth accounts could become fully taxable in Canada. This is the single biggest risk to the tax-free status of your Roth assets.
Given the importance of this election, it’s worth considering a strategy to maximize your Roth contributions before you move, including the back-door Roth contribution strategy, to take full advantage of this unique tax-exempt status in the US and Canada.
Deciding What to Sell: Your Home, Car, and Investments:
US Real Estate:
The Easiest Route: Sell Before You Move
The simplest way to handle this is to sell your US principal residence before you become a Canadian tax resident. Why? Because you can use the generous US principal residence exclusion ($250,000 for a single filer, $500,000 for a couple) to shelter your capital gains from US tax. Since you’re not yet a Canadian tax resident, Canada has no claim on that gain. No fuss, no muss.
If you sell your US home after you’ve moved to Canada, things get a bit more complex. You can still use the US principal residence exclusion if you meet the “2 out of 5 years” test (meaning you lived in it as your principal residence for at least two of the five years before you sell). However, Canada will now have a say.
Canada will subject the appreciation from the day you arrive to capital gains tax.
You can avoid this by strategically using the Canadian principal residence exemption. To do this, you would designate your US home as your principal residence for the years in question, meaning you can’t also designate your Canadian home as your principal residence for those same years.
This is a choice you have to make, and it’s not one to take lightly. You need to figure out which home has a bigger gain to maximize your tax savings. Ultimately, it’s about making sure you coordinate both the US and Canadian tax rules to avoid a costly “oops.”
- Your Car: From a practical standpoint, importing a US vehicle to Canada can be costly and complex due to different safety standards, customs duties, and GST/HST. In many cases, look to avoid the hassle, sell your car in the US and purchase a new one in Canada.
- The US Estate Tax Trap: This is a critical risk. Once you are a Canadian resident (and not a US citizen), you are considered a “non-resident alien” for US estate tax purposes. The federal estate tax exemption for non-residents holding US assets is a mere $60,000, compared to $15 million (2025) for US citizens. This means if you pass away while owning US situs assets—like a California vacation home or rental property, or even US stocks kept in a regular brokerage account—your estate could face a substantial US tax liability. This means it’s safer and simpler to sell your US property and move your brokerage account up to Canada.
Don’t Navigate the Border Alone
Moving to a new country is a major life transition. When that move involves two of the most complex tax systems in the world, the financial stakes are incredibly high. The difference between a well-executed plan and a reactive tax filing can amount to tens or even hundreds of thousands of dollars.
Just as you would consult an expert to navigate a complex tech problem, you need a professional team to manage your cross-border financial life. Working with a qualified cross-border financial planner and accountant before you move is not a luxury—it is an essential step in safeguarding your financial future.
Comprehensive Cross-Border Financial Planning
A knowledgeable cross-border team can help you optimize your tax efficiency, manage distributions effectively, and navigate the complexities of both U.S. and Canadian tax regulations.
That’s the Cardinal Point difference: a seamless, sophisticated advisory experience built for those living or moving across borders.
Our experienced advisors have helped countless professionals navigate the financial complexities of crossing the border. Be sure to reach out before you move!
Disclosure
This article is for informational purposes only. Please do not use it as financial or tax advice, as your situation could lead to different advice. It is essential to remember to consult with a qualified cross-border professional before making any decisions regarding your retirement.
Ready to take the next step?
Contact Cardinal Point Focus Partners Canada today to discuss your cross-border financial needs.