Moving to Canada from the US: the first-year tax checklist

Your residency start date is the hinge

Canadian tax residency usually begins the day you establish significant residential ties — a home here, a spouse or partner here, dependants here — which for most families is simply the day they arrive to stay. Your first T1 is a part-year return: worldwide income from that date forward and, before it, only specific Canadian-source items. Because every other number on the return keys off this date, we pin it down with evidence — lease or closing date, arrival records, the family's move — before anything else.

Everything steps up to fair market value on arrival

On the day you become a resident, the Income Tax Act deems you to have disposed of and immediately re-acquired most capital property at fair market value. No tax is triggered — the point is your new Canadian cost base. Gains that built up during your US years never enter the Canadian calculation; only growth after arrival does. This is the mirror image of Canada's departure tax, which applies the same deemed disposition on the way out.

The step-up is only as good as your records. Brokerage statements, a home appraisal or market analysis, and crypto valuations dated to arrival day are cheap to collect now and expensive to reconstruct years later when you sell.

The first-year checklist

Leave your state properly, not just physically

The IRS lets you go; some states do not. Domicile-based states — California is the famous one — keep taxing people who moved but kept a driver's licence, a voter registration, or a home they can return to. File the final part-year or non-resident return, close out the obvious ties, and keep the moving-date evidence with your tax file. State follow-up letters two years later are common, and easy to answer when the file is clean.

If you are a US citizen or green-card holder, the 1040 never stops

Moving does not end US obligations for a US person: a 1040 on worldwide income every year, an FBAR once your Canadian accounts exceed US$10,000 combined, and Form 8938 at higher thresholds. The traps are the accounts that look ordinary in Canada: Canadian mutual funds and ETFs in taxable accounts are usually PFICs, with punitive US treatment, and the TFSA has no treaty protection at all. The treaty and foreign tax credits eliminate most double tax — Canadian rates are generally the higher of the two — but only when the two returns are built together, by people who can see both.

RRSP room starts in year two — and Form 8891 is dead

RRSP contribution room is built from the prior year's Canadian earned income (18% of it, up to an annual cap — confirm the current-year figure), so a newcomer has nothing to deduct in the arrival year. Your arrival-year earnings create room for year two, which is when RRSP planning starts in earnest. TFSA room also begins only once you are a Canadian resident — though if you are a US person, read the paragraph above before opening one.

One myth to retire: US persons no longer file Form 8891 for RRSPs. The IRS scrapped the form at the end of 2014 (Rev. Proc. 2014-55) and made treaty deferral of tax on growth inside the plan automatic. The accounts still belong on the FBAR and Form 8938 — automatic deferral is not invisible money.

Source: CRA — Newcomers to Canada.