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Moving to one of the states without state income tax doesn’t end your Canadian tax bill. What ends it is ceasing to be a Canadian resident for tax purposes, and the CRA decides that from your ties to Canada, not from the state you pick. Until then you report worldwide income to Canada, whatever a US state does or doesn’t charge.
We’re a Canadian tax site, so this page covers the Canadian side of the move. We didn’t confirm a list of US states or their rules, and you should get those from the states themselves.
Do states without state income tax free you from Canadian tax?
No, not by themselves. The CRA treats you as an emigrant when you leave, make your permanent home abroad and sever your residential ties here. If you keep significant ties, you are usually a factual resident, and you keep filing and paying as if you’d never left.
The ties that matter most are the ones you’d expect: a home you keep available, a spouse or dependants who stay behind. The CRA weighs all the facts, including how long and why you’re away. If you’re unsure where you stand, the CRA has a form for that question, NR73. Asking before the move beats guessing after it.
When do you stop being resident?
Usually on the latest of three dates: the day you leave, the day your spouse or dependants leave, or the day you become a resident of the new country. So a family that moves in two stages may become non-resident later than the first person out the door.
| Question | What the CRA page says |
|---|---|
| Which tax package do you use in your last year? | The one for the province or territory where you lived on the day you left |
| What do you report before you go? | Worldwide income, in Canadian dollars |
| What do you report after you go? | Certain Canadian-source income, and some of it is taxed at source |
| When must you file form T1161? | If the property you own is worth more than $25,000 when you leave |
| What share of a gain counts as income? | Generally 50% |
What is the departure tax?
When you leave, the CRA treats certain property as sold at its market value, though you haven’t sold a thing. That covers things like shares, jewellery, paintings and collections. Any gain on that paper sale goes on your final Canadian return, and there’s no cash from a sale to pay it with. That surprises people.
Here’s what it looks like. Say you live in Ontario on an $80,000 salary and hold shares that cost $100,000 and are worth $250,000. The $150,000 gain puts $75,000 into income. Our engine puts the extra tax at about $28,100, on top of the $14,100 you’d owe on the salary alone. That’s before any exemption or credit, and the CRA page names exceptions we haven’t modelled, so don’t treat the figure as a quote. Run your own case in the capital gains tax calculator.
What could a move actually save?
Less than the sales pitch suggests, and we can’t price the US side at all. What we can show is the Canadian bill you’d be leaving. A resident of Ontario on $100,000 pays about $20,000 in federal and provincial income tax by our numbers. Put your own income into the income tax calculator, then set that figure against what you’d pay abroad in federal tax, health cover and housing, because a state with no income tax often makes up the money somewhere else.
The marginal tax rate calculator shows what the next dollar costs you in Canada. That helps if you’re deciding whether to sell shares yourself in the year you leave, when the deemed sale would hit that year’s return anyway.
Mistakes to avoid
The most common one is leaving in a hurry and keeping the house, the bank accounts and the family. That can leave you a Canadian resident who is also taxed by a US state, and nobody enjoys that. The second is forgetting form T1161. The third is assuming the CRA will take your word that you’ve gone, when the facts decide.
Also remember that leaving affects provincial credits. The CRA notes that provincial credits generally need you to be a resident on December 31, so a mid-year departure changes what you can claim. And if you plan to come back, a stay that’s too short may not count as a real departure.
Where the numbers come from
The residency and departure rules come from the Canada Revenue Agency’s pages on leaving Canada and on determining residency status, read in September 2026. Tax figures are from our own 2026 engine, using federal and Ontario brackets published by the governments. We couldn’t confirm anything about individual US states, so we say nothing about them. A cross-border move can also involve US federal tax and the Canada-US treaty, and neither is covered here.
Frequently asked questions
Do I stop paying Canadian tax if I move to a state with no income tax?
Only if the CRA treats you as a non-resident. That depends on whether you keep significant ties to Canada, not on the state's tax.
What is a factual resident?
Someone who has left Canada but keeps significant residential ties, so the CRA still treats them as a Canadian resident for tax.
What is the departure tax?
On leaving, you are treated as having sold certain property at market value. The gain, generally 50% taxable, goes on your final Canadian return.
When do I need form T1161?
When the property you own is worth more than $25,000 at the time you leave.
How do I find out my residency status?
The CRA offers form NR73 to determine residency status before or after leaving.
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.