You’ve never paid state income tax. Canada is about to notice.
Texans arrive in Canada with an advantage and a shock. The advantage: no state residency to terminate, no state return to close out, no state chasing you afterward. The shock: you’re moving from one of the lowest-tax places in North America to one of the highest, and the accounts and property you built in Texas — the homestead, the mineral interests, the community property — behave differently once the CRA is involved. This guide is the Texas-specific layer. For what every American faces, start with the national guide.
Three things that change when zero becomes the starting point.
The jump is bigger than anyone else’s
A Californian moving to Canada trades one high-tax system for another. A Texan trades a federal-only bill for federal plus provincial, and the provincial layer alone can rival what the state tax would have been anywhere else. Every pre-move decision — Roth conversions, gain harvesting, when to sell — is worth more to a Texan than to almost any other American.
Your wealth is in things Canada taxes differently
Texans disproportionately own real estate under a homestead exemption, mineral and royalty interests, and closely held businesses run through LLCs. Each of those has a specific Canadian treatment, and two of the three are traps if left as they are.
Community property — the Texas version
Texas is a community property state, and it goes further than California: income earned on separate property is community income in Texas. That distinction matters when the CRA asks who owns what, and when U.S. estate tax looks at the first death.
From no state income tax to Canada: what your bill really looks like.
Start with what doesn’t change. As a U.S. citizen or green-card holder you keep filing a federal return and paying federal tax on worldwide income for as long as you hold that status. What you add is a Canadian return on the same worldwide income, taxed federally and provincially, with the treaty and foreign tax credits making sure the same dollar isn’t taxed twice. In practice you pay the higher of the two systems on each type of income. For a Texan, the higher one is almost always Canada.
That is the whole tax jump in one sentence: you used to pay one layer, and you will now pay whatever Canada’s two layers add up to. The federal portion you were already paying mostly comes back as a credit. The provincial portion is new money.
The second-order effects are where planning earns its keep. Canada includes only half of a capital gain in income but taxes that half at your full marginal rate; the U.S. taxes the whole gain at a lower preferential rate. The one-half inclusion rate still stands — a proposed increase to two-thirds was deferred and then cancelled in March 2025, and the CRA sets out the current rules in guide T4037, Capital Gains. Canada taxes dividends from U.S. companies as ordinary income with a partial credit for U.S. withholding; there is no equivalent of the qualified-dividend rate. Canada has no concept of a Roth: growth inside one is tax-free only because the treaty says so, and only if you file the election. Interest income that was taxed once in Texas is now taxed at a combined rate that can be meaningfully higher.
AS A TEXAS RESIDENT
U.S. federal income tax
The only layer you have ever paid
No state income tax
AS A CANADIAN RESIDENT (STILL A U.S. PERSON)
U.S. federal
Largely offset by credit
Canadian federal
New
Provincial
New — the real jump
This column is what a Texan has never paid
Credits stop the same dollar being taxed twice — you pay the higher system on each type of income.
None of this argues against the move. It argues for doing the expensive things — conversions, sales, harvesting — while you’re still a Texas resident and the state’s share is zero, and for restructuring the income you’ll live on in Canada toward what Canada treats gently. Which brings us to the window.
| As a Texas resident | As a Canadian resident (still a U.S. person) | What that means |
|---|---|---|
| Federal income tax only. No state income tax. | U.S. federal return plus Canadian federal and provincial return; credits prevent double tax. | You pay the higher system on each income type — usually Canada’s. |
| Long-term capital gains at preferential federal rates. | Half the gain included, taxed at your full Canadian marginal rate; U.S. still taxes its way, with a credit. | Harvest gains you were going to take anyway before your residency date. |
| Qualified dividends at preferential rates. | Ordinary income to Canada, with a partial credit for U.S. withholding. | Dividend-heavy portfolios get more expensive. Review the income mix. |
| Roth conversions taxed federally, no state layer. | Conversions taxed by Canada as income; contributions break the treaty protection. | The pre-move conversion window is worth more to a Texan than anyone. |
| No state estate or inheritance tax. | No Canadian estate tax, but deemed disposition of everything at death; U.S. estate tax still applies to citizens. | Two death-tax regimes with different triggers. See estate planning. |
Simplified for orientation. Rates and thresholds change annually and vary by province. Educational, not tax advice.
Seven things worth doing while Texas is still home.
Because your state share is zero, every one of these is cheaper before your Canadian residency date than it will ever be again.
Fix your Canadian residency date
Texas won’t fight you on leaving — there’s no state income tax residency to terminate — so the only date that matters is the day you become a Canadian tax resident. Everything below is timed against it. Our guide to when an American becomes a Canadian tax resident covers how that day is determined.
Run the Roth conversion math
A conversion as a Texas resident costs federal tax and nothing else. The same conversion a year later, as a Canadian resident, costs Canadian federal and provincial tax at full rates. The gap between those two numbers is often the single largest planning win available to a Texan heading north. Whether to convert, and how much, depends on your bracket and your Canadian income plan — that’s the first thing we model.
Harvest the gains you were going to take anyway
Canada resets your cost basis to fair market value on arrival day; the IRS doesn’t. Selling and rebuying appreciated positions before the move locks in the U.S. gain at Texas-resident rates and gives Canada a clean starting point — the CRA explains the arrival-day valuation in its guidance on completing a return for newcomers to Canada. The first-year guide explains the deemed-acquisition rule.
Decide what the LLC becomes
Texans run everything through LLCs. Canada does not see an LLC the way the IRS does — it treats it as a corporation, and the pass-through treatment that made it efficient in Texas can produce double taxation once you’re resident. Converting, restructuring or winding down is a before-the-move decision.
THE WINDOW
Still a Texas resident · state share is zero
AFTER
Canadian resident
Your Canadian residency date
1 · Fix the date
2 · Roth conversion math
3 · Harvest gains
4 · Decide the LLC
5 · Settle the homestead
6 · Inventory mineral interests
7 · Document community property
Each one costs more on the other side of the line.
Settle the homestead question
Sell, rent or hold. The homestead exemption and appraisal cap only protect a primary residence; the moment it’s a rental, the property-tax picture changes. See “Your Texas home” below.
Inventory mineral and royalty interests
List every interest, its lease, and what it paid last year. Royalties are U.S.-source income that both countries will tax, and the interests themselves are U.S. real property for estate purposes. See below.
Document community property while Texas law governs
Decide how each asset is characterized and titled before you cross. Texas rules on separate-property income are unusual, and they shape both the Canadian income picture and the U.S. estate picture. See the community-property section.
Your Texas home: homestead, appraisal cap, and the rental question.
Texas has no income tax because it has property tax, and the homestead exemption plus the annual appraisal cap — which limits the increase in the appraised value of a qualifying residence homestead to 10% a year, per the Texas Comptroller on property tax exemptions — are what make owning a primary residence bearable. Both disappear the day the house stops being your primary residence. A Texan who keeps the home as a rental doesn’t just add Canadian and U.S. income tax on the rent; they lose the exemption, the cap resets, and the property-tax bill can step up sharply at the next appraisal. Run the numbers on the after-tax rent with the full unprotected property tax, not the bill you’re paying now.
Selling before you leave is the clean option. The federal primary-residence exclusion — up to $250,000 of gain for a single filer, $500,000 on a joint return, per IRS Topic no. 701, Sale of your home — applies, Texas has no tax on the gain, and Canada has no claim because you weren’t resident. Whatever isn’t excluded is taxed federally at long-term rates.
Selling after you leave keeps the federal exclusion available for a period after you move out, but Canada now sees a property it deems you acquired at arrival-day value; any appreciation between arrival and sale is Canadian-taxable. Sell close to the move and that slice stays small.
Holding it as a rental is where Texans differ from everyone else, because the property-tax swing is so large. It can still make sense — Texas rents are strong — but decide with the real numbers. If you do hold, there’s a compensating simplicity: no state residency audit is coming. Texas doesn’t care that you kept the house. Only your appraisal district does.
On the Canadian side, your next home qualifies for the principal residence exemption from day one, and to the IRS it’s just a house — the gain above the federal exclusion is taxable when you eventually sell. Buying property in Canada as an American covers that purchase.
Mineral rights and royalties: the income that follows you north.
Mineral interests are a Texas thing in a way they aren’t almost anywhere else, and they behave distinctively across the border. The royalty income is U.S.-source; the U.S. taxes it first and Canada taxes it too, with a credit. Depletion, which is what made royalty income efficient on a U.S. return, has no direct Canadian equivalent, so the Canadian tax on the same royalties can be higher than you expect.
The interests themselves are U.S. real property. That has two consequences. For a U.S. citizen, they’re part of the worldwide estate regardless of where you live. For the Canadian side, they’re subject to deemed disposition at death like everything else you own. And if the interests are held in an LLC — common — the entity question above applies to them too.
Two practical points. First, get every interest appraised as of your arrival day; that valuation is your Canadian cost basis, and mineral values are hard to reconstruct later. Second, decide whether the income is worth the two-country complexity, or whether a sale before the move — at Texas-resident tax cost — is the cleaner path. Neither answer is automatic.
Community property, Texas style.
Like California, Texas presumes that property acquired during marriage belongs to both spouses equally — one of the nine community property states the IRS addresses in Publication 555, Community Property. Unlike California, Texas treats the income from a spouse’s separate property — dividends on inherited stock, rent from a house owned before the marriage — as community property too. That’s a genuinely different rule, and it matters at the border.
Canada has no community property. For income tax, the CRA taxes the spouse who legally owns the asset and earns the income, and attribution rules push income back to whoever supplied the funds when money moves between spouses. So a Texan couple arrives with assets that Texas says are half-and-half, titled in ways that reflect Texas law, into a system that will look at title and source of funds and may reach different conclusions about who reports what.
For U.S. estate tax, community property gets a full basis step-up on the first spouse’s death — one of the most valuable features of living in a community property state, and one that’s easy to lose by retitling assets on the way out without understanding what you’re doing. Texas’s inclusion of separate-property income in the community makes the step-up analysis broader than in other states.
The action is the same as for any community-property couple, with a Texas footnote: document the character of each asset and decide on titling while Texas law still governs the answer, and get an estate attorney who understands both the Texas rules and what Canada will do with them. Our estate-exposure check is a quick first pass.
Most Texans heading north are on one of two routes.
Houston
Energy
Austin
Tech
Calgary
Toronto
49° N
Alberta — the gentlest provincial rates
Ontario — among the steepest
Houston to Calgary
The same industry, the same employers in many cases, and a compensation structure built on equity, bonuses and sometimes overriding royalty interests. The move often comes with a transfer, which means unvested equity earned in Houston vesting after you’re an Albertan — taxed by both countries, reconciled by credit.
Alberta has the lowest provincial rates in Canada, which softens the jump more than any other destination. It’s still a jump. Calgary-specific planning sits in our Calgary cross-border guide.
Austin to Toronto
Founders and engineers with RSUs, options and often a stake in a company that’s still private. Ontario’s rates are among the highest in the country, so the tax jump is at its steepest — and equity that’s illiquid when you move can create Canadian tax when it vests with no cash to pay it.
The pre-move window matters most here: conversions, exercising options while still a Texas resident, and getting the LLC or C-corp structure right before Canada sees it. Toronto planning lives in our Toronto cross-border guide.
Leaving Nevada, Washington or another no-income-tax state? Everything in the tax-jump and pre-move sections applies to you too. The homestead, mineral-rights and community-property sections are Texas-specific.
The rest is the same for every American heading north.
401(k)s, the Roth election, PFICs, the TFSA question, FBAR and dual filing don’t care which state you left. They’re covered once, properly, in the national guide.
401(k), IRA and Roth after you move northRetirement
The one-time Roth treaty electionRetirement
401(k) vs RRSP: where to save once you’re in CanadaRetirement
What is a PFIC?Investing
Can a US citizen have a TFSA?Investing
FBAR for U.S. persons in CanadaCompliance
The tax reality of dual filingTax
The Canada–U.S. Tax Treaty GuideReference
Every cross-border tax form in one placeReference
Deeper dives, one topic at a time.
What Texans ask before they move.
How much more tax will I pay in Canada than in Texas?
More, and the amount depends on province and income mix. You keep paying U.S. federal tax and add Canadian federal and provincial tax; credits prevent double taxation, so you effectively pay the higher system on each type of income. For most Texans that’s Canada’s. Alberta is the gentlest province; Ontario and British Columbia are among the steepest. Capital gains, U.S. dividends and interest are all treated less favorably than you’re used to.
Do I need to do anything to stop being a Texas resident for tax?
No. Texas has no income tax, so there’s no residency to terminate and no state return to close out. Your only date that matters is your Canadian residency date. You may still want to update your domicile for estate and legal purposes, and the homestead exemption ends when the house stops being your primary residence.
Should I convert my traditional IRA to a Roth before I move?
It’s the question most worth asking. A conversion as a Texas resident costs federal tax only; a year later, as a Canadian resident, it costs Canadian federal and provincial tax at full rates, and Roth contributions as a Canadian resident break the treaty protection. Whether and how much to convert depends on your bracket and your Canadian income plan. Run it before the move, not after.
What happens to my LLC when I move to Canada?
Canada treats a U.S. LLC as a corporation, not a pass-through, which can produce tax at both the entity level and the personal level once you’re resident. Restructuring — to a C-corp, a Canadian entity, or by winding it down — is a decision to make before your residency date.
Can I keep my Texas house as a rental?
You can, and there’s no residency audit to worry about. But the homestead exemption and appraisal cap end when it stops being your primary residence, so the property-tax bill can rise sharply. Both countries tax the rent, with a credit. Model the after-tax return using the unprotected property tax, not today’s bill.
How are my mineral rights and royalties taxed once I’m in Canada?
Royalties are U.S.-source income taxed first by the U.S. and again by Canada with a credit; depletion has no direct Canadian equivalent, so the Canadian tax can be higher than you expect. The interests are U.S. real property for estate purposes and subject to Canada’s deemed disposition at death. Get them appraised as of your arrival day.
Does Texas community property matter in Canada?
Yes. Canada has no community property, so the CRA looks at legal title and source of funds to decide who reports income. Texas’s rule that income from separate property is community property makes the analysis broader than in other states. For U.S. estate tax, community property gets a full basis step-up at the first death — valuable, and easy to lose by retitling carelessly. Document everything while Texas law still governs.
I’m leaving Nevada, not Texas. Does this apply?
The tax-jump and pre-move sections apply to anyone leaving a no-income-tax state — Nevada, Washington, Florida, Wyoming and the others. The homestead, mineral-rights and Texas community-property sections are Texas-specific. Nevada is also a community property state, but without the separate-property-income rule.
General educational information only — not tax, legal, or investment advice. Rates, exemptions and treaty positions change; confirm current rules with a cross-border professional before acting.
Lucas Wennersten
Lucas made the move from the U.S. to Canada himself. He holds the CFA and CFP® designations in both countries, runs a fee-only fiduciary practice from Scottsdale and Vancouver, and is the author of Crossing the 49th Parallel. For Texas families the work starts with the pre-move window — the year when zero state tax makes every big decision cheaper than it will ever be again.
Use the window while you still have it.
Twenty minutes with Lucas to size the Roth conversion, decide on the house and the LLC, and see what your first Canadian tax year actually looks like — before your residency date makes the answers more expensive.
Introductory meeting
- Your Canadian residency date and the pre-move window
- The Roth conversion, the house, the LLC
- Whether we’re the right fit — and if not, who is
49th Parallel Wealth Management is a registered investment adviser; advisory services are offered only where the firm is registered or exempt.
