Moving from Canada to Washington: Taxes in the No-Income-Tax State Next Door

Washington has no state income tax, full stop, on wages, salary, pensions, dividends, or interest. That’s the headline that draws Canadians from every province, not just BC. But “no income tax” isn’t the same as “no state tax,” and treating it that way leads to surprises: a 7% excise tax on large capital gains, a sales tax north of 10% in the Seattle metro, and a gross-receipts B&O tax that catches anyone self-employed. This guide covers the Washington-specific rules for a Canada-to-Washington move, regardless of which province you’re leaving.

What makes Washington different from other US states?

Most no-income-tax states (Texas, Florida) simply don’t tax investment income either. Washington is the exception: it created a standalone capital gains excise tax in 2021, and the state Supreme Court upheld it in March 2023 by classifying it as an excise tax on the sale, not an income tax on the seller. That distinction matters because it lets Washington avoid its own constitutional ban on income taxes, and it means the tax applies to a transaction (the sale) rather than to your overall income for the year.

What taxes does Washington actually charge?

Washington replaces income tax with a handful of other levies, and comparing them side by side with Canadian provincial rates shows where the savings are real and where other costs fill part of the gap.

Tax	Washington	Ontario	BC	Alberta	Quebec
Personal income tax (top marginal)	0%	~20.5%+ combined fed/prov	~20.5%+ combined	~15%+ combined	~25.75%+ combined
Capital gains	7% on long-term gains over ~$270,000	Included in income tax	Included in income tax	Included in income tax	Included in income tax
Sales tax	6.5% state + up to ~4% local (10-10.5% in Seattle metro)	13% HST	5% GST + 7% PST	5% GST only	5% GST + 9.975% QST
Estate tax	Graduated 10-20% above ~$2.193 million	None (deemed disposition instead)	None (deemed disposition instead)	None (deemed disposition instead)	None (deemed disposition instead)

Property tax runs roughly 0.9% to 1.1% of assessed value in most Washington counties, which is unremarkable by US standards and often lower than what Canadians pay on comparable Toronto or Vancouver assessments.

How does the 7% capital gains tax actually work?

It applies only to long-term gains (assets held over a year) on stocks, bonds, and similar capital assets, above the annual threshold. For someone arriving with employer stock or a Canadian brokerage account, the practical read is that your paycheck is untaxed by the state, but a large single-year liquidation of appreciated securities can trigger the 7% on the amount over the threshold. Spreading sales across tax years is the most common planning lever.

Excluded from the tax entirely:

• Real estate sales of any kind
• Retirement account distributions (IRA, 401(k), pension)
• Gains on a principal residence sale
• Sales of livestock, timber, and certain family-owned small-business interests

Who’s actually making this move?

Three groups account for most of this corridor, each bringing slightly different tax-planning priorities to the same destination:

• Tech talent, Vancouver and Toronto professionals moving into Seattle and Bellevue for Amazon, Microsoft, Google, or Meta roles, usually on a TN or H-1B
• Aerospace workers, Bombardier and other Canadian aviation-sector employees moving into Boeing’s Puget Sound operations
• Film and visual-effects staff, following production and post-production work between Vancouver and the Seattle area

All three groups share the same core issue: significant unvested equity, RSUs, or deferred compensation that needs departure-tax planning before the move, not after.

What happens on the Canadian side when you leave?

Departure tax applies regardless of destination state or province of origin. Canada deems you to have disposed of your worldwide assets at fair market value the day you cease residency, with exceptions for Canadian real property, pensions, and a few other categories. Provincial tax on that deemed gain still applies based on where you were resident before leaving, which is why the province you’re leaving from matters even though Washington itself won’t touch it. The departure tax checklist and the T1161/T1243 filing guide cover the mechanics and forms.

Does the RRSP get simpler in a no-income-tax state?

Yes, this is the cleanest part of the Washington move. Because there’s no state income tax at all, there’s no state-level question about whether the treaty’s RRSP deferral applies, unlike states such as California that ignore the treaty and tax RRSP growth annually.

• On withdrawal, a Washington resident owes federal tax at ordinary rates plus Canadian Part XIII withholding (15% on periodic payments under the treaty, 25% on lump sums), and nothing more to the state.
• The TFSA doesn’t get the same treaty protection and should generally be collapsed before leaving to avoid ongoing Form 3520 reporting, a question also covered in the TFSA foreign trust guide.
• FBAR reporting on any Canadian accounts still applies from year one; see the FBAR filing guide.

What if you’re self-employed or running a business?

Washington’s B&O tax applies to gross receipts, not net income, with no deduction for costs. Rates depend on classification: roughly 1.5% for service businesses, lower for retailing and manufacturing. A consultant billing $300,000 a year owes about $4,500 in B&O tax before federal self-employment tax and income tax even enter the picture.

• That’s a different structure than any Canadian province, where business income flows through personal tax or a corporation’s small-business rate, and it means high-margin service businesses often do fine under the B&O system while thin-margin operations pay more than they expect.

What should you do next?

The Canadian exit is the same regardless of destination, work through the full departure sequence before the move, not after. On the Washington side, the items specific to this state are the capital gains threshold, the B&O tax if self-employed, and the estate tax exposure if your combined estate runs above roughly $2.193 million.

• Departure tax checklist, the full Canadian exit sequence
• T1161/T1243 filing guide, the departure-year forms
• RRSP and TFSA on a US move, federal treatment and reporting
• US estate tax for Canadians, where Washington’s estate tax stacks with federal exposure
• State income tax overview, Washington compared against other destination states
• Foreign tax credit and carryover, how residual Canadian tax interacts with the first US return
• First US tax return for new immigrants, the filing mechanics for year one
• BC-to-Washington corridor guide, province-specific rate detail for BC filers
• Ontario-to-Washington corridor, the Ontario tech corridor into Seattle
• Alberta-to-Washington corridor, the energy-to-tech corridor from Calgary
• Quebec-to-Washington corridor, the three-authority departure into Washington
• Vancouver to Seattle, the city-level tech corridor deep dive

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.