Moved provinces: which province taxes your income for the year

Which province do I file taxes in after moving?

File for the province or territory where you lived on December 31. That province taxes your income for the whole year, including what you earned before the move; the year is not split between the two provinces. On the return you enter the province where you lived, or were a factual resident, on December 31, and, on the next line, where you live now if it differs from your mailing address (CRA: province of residence).

The law behind it: if you reside in a province on the last day of the year and have no business with a permanent establishment outside it, all your income for the year is income earned in that province (Income Tax Regulations, s. 2601). Where you worked, owned a home or where your employer sits does not change that. If you left Canada during the year, the test uses the last day you lived in Canada instead of December 31 (Regulations, s. 2601(5)); that year is covered in leaving Canada.

A case is not simple when you keep a home in two provinces, Québec is on either side, you have business income in more than one province, you arrived in or left Canada that year, you live abroad, or Revenu Québec or the CRA disputes your province. Gather leases or deeds for each home, the date you moved, your T4 and RL-1 slips, and where your spouse and children lived.

Which is my province of residence if my family lives in one province and I work in another?

Generally the province where your home life is: if you are resident in more than one province on December 31, you are treated as resident only in your principal place of residence (Regulations, s. 2607). The CRA looks for the province where you have the most significant residential ties, such as a home, a spouse or common-law partner and dependants (Folio S5-F1-C1, paragraphs 1.2–1.3).

A worker who rents a room near a job in Alberta while a spouse and children stay in the family home in Manitoba has the ties the CRA weighs most (home, spouse, children) in Manitoba. The answer depends on facts, not on a choice you make, so keep proof of where your household lives. Québec applies its own law to decide whether you live in Québec (Revenu Québec: residence status). Whether you are a resident of Canada at all is covered in Canadian tax residency.

Does the province where I work tax my pay?

No, not for employment income. Pay from a job is taxed by the province you lived in on December 31, even if every workday was in another province (Regulations, s. 2601). Employment income is never divided between provinces.

Business income is different: a self-employed person or partner with a permanent establishment in another province splits business income between provinces. That is covered in operating in more than one province.

Why is my employer deducting tax for the wrong province?

Payroll follows your province of employment, not where you live. Your employer withholds provincial tax for the province where you report for work, the establishment a full-time remote worker is attached to, or the establishment that pays you (CRA: province of employment). A remote worker in one province paid through an office in another often gets the wrong provincial tax.

The CRA says that when the two provinces differ, an employee may have too little or too much tax deducted (CRA: increase or reduce tax deducted). At tax time, outside Québec, all federal and provincial tax shown on your slips counts on line 43700, so the gap shows up only as a refund or a balance owing. Québec residents see the Québec section below.

Province of employment is a payroll rule, not your choice; the employer's side is covered in operating in more than one province. A balance owing above $3,000 ($1,800 for Québec residents) can lead to instalment reminders; interest and late-filing penalties are covered in penalties, interest and relief.

I live in Québec and work in Ontario, or the reverse: which returns do I file?

Québec runs its own income tax, so a Québec resident on December 31 files two returns: a federal return with the CRA and a Québec return with Revenu Québec. A resident of any other province files the federal return, which includes that province's tax.

The December 31 test also decides moves. If you moved into Québec during the year, you file both returns and transfer tax withheld by your earlier employer outside Québec on line 43800. If you moved out of Québec, include any Québec tax withheld on federal line 43700 (CRA: line 43700).

For the Québec resident, the transfer moves tax already withheld to Québec, where the income is taxed (CRA: line 43800). If Québec taxable income is zero, no transfer is needed. Do not put Québec tax on line 43700 if you lived in Québec on December 31 (CRA: line 43700).

For the Ontario resident, the CRA says to include Québec tax withheld on line 43700 of the federal return. A business with Québec clients or workers is covered in doing business in Québec from another province.

Which province do I pay tax in while living abroad?

It depends on whether you are still a factual resident of Canada. A factual resident who keeps significant residential ties stays taxable on worldwide income and is generally resident in the province of those ties (Folio S5-F1-C1, paragraphs 1.2 and 1.10; CRA: factual residents temporarily outside Canada). Generally, that is the province you lived in before you left.

A deemed resident is resident in Canada by law rather than by ties, such as a member of the Canadian Forces or certain government employees posted abroad, and is not resident in any province (Folio paragraphs 1.30 and 1.34). A deemed resident pays no provincial tax, gets no provincial tax credits or direct tax-based provincial benefits, and instead pays a federal surtax of 48% of federal tax, in proportion to the share of income not earned in a province (Income Tax Act, s. 120(1)). Someone who lived in Québec right before leaving may also be treated as a Québec resident under Québec law; a person who must pay both Québec tax and the federal surtax can ask the CRA for relief from the surtax when filing (Folio paragraph 1.31).

Whether you are still a resident is covered in Canadian tax residency; leaving for good in leaving Canada; and returns after you leave in non-resident returns and catching up. Living in Canada while working for an employer abroad is in remote work for employers abroad.

Do my benefits and credits change when I move provinces?

They can. The CRA uses the province on your return to calculate the provincial or territorial credits and benefits you may get (CRA: province of residence), so a move can change which provincial programs apply.

Tell the CRA your new address when you move. Benefit and credit payments may stop if you do not, even with direct deposit to the same bank account (CRA: keep your information up to date). The fastest way is online in your CRA account. The CRA does not share an address change with other government departments; you contact each one yourself (CRA: change your address), so a move into or out of Québec also needs an update with Revenu Québec.

Revenu Québec says I owe tax for a year I lived in another province: what do I do?

You can answer it with proof of where you lived on December 31, and object in time if Revenu Québec has already issued a notice of assessment. Revenu Québec decides Québec residence under Québec law.

Gather the lease or deed for your new home, utility bills, a provincial health card and driver's licence from the new province, school records for children, and the federal return filed for the other province. An objection is due by the later of 90 days after the notice and one year after the return's filing deadline (Revenu Québec: objection time limit). A CRA assessment has the same two limits (90 days and 1 year; Income Tax Act, s. 165(1)). If both Québec and another province claim you for the same year, the result turns on facts each tax authority weighs under its own law; that case needs professional judgment.

Can I deduct moving costs when I move to another province for a job?

You can, if your new home is at least 40 km closer to the new work location by the shortest public route, and you moved to work or run a business there. The deduction comes only off employment or self-employment income earned at the new location; an unused amount carries forward to a later year, not back (CRA: line 21900). If your employer paid or reimbursed the move, claim only what was not reimbursed, unless you include the reimbursement or allowance in your income (Income Tax Act, s. 62(1)); the CRA may ask for a letter from your employer saying you were not reimbursed.

Work it out on Form T1-M, one form per move, and claim it on line 21900. Keep receipts and the dates of the move.

Example

These examples are illustrative; all figures are in Canadian dollars.

Calgary to Toronto in September

An employee earns C$60,000 at an Alberta job, moves to Toronto in September and earns C$30,000 at a new Ontario job. She has two T4s. She lives in Ontario on December 31, so all C$90,000 is taxed as Ontario income. The tax the Alberta payroll withheld still counts on line 43700. If the new home is at least 40 km closer to the new job, her moving costs come off the C$30,000 Ontario pay; any unused part carries forward to next year.

Halifax resident paid through a Vancouver office

An employee lives in Halifax and works remotely full time for an employer that attaches him to its Vancouver office. Payroll withholds federal and B.C. tax on his C$100,000 salary. Nova Scotia taxes all of it; where Nova Scotia's tax is higher than B.C.'s, the shortfall shows up as a balance owing. For the next year he gives his employer revised TD1 forms asking for extra tax to be deducted each pay.

Gatineau resident working in Ottawa

An employee lives in Gatineau and works in Ottawa. Ontario payroll withholds C$20,000 of combined federal and Ontario tax. As a Québec resident on December 31 she files a federal return and a Québec return. She can transfer up to C$9,000 (45% of the C$20,000 on her slips) on federal line 43800 and enters the same amount on Québec line 454.

Different for you?

• You may not be a resident of Canada at all, or you split time with another country: see Canadian tax residency and get individual tax help.
• You keep homes in two provinces, or Québec is on either side of your move or job: the province of residence is a fact question with real tax at stake; get individual tax help.
• Revenu Québec or the CRA has assessed you in a province you say you left: watch the objection deadline, the later of 90 days after the notice and one year after the filing deadline, and get individual tax help.
• You are self-employed or a partner with an establishment in another province: see operating in more than one province.
• You arrived in Canada this year: see first year as a Canadian tax resident.
• You lived abroad for years: see leaving Canada and non-resident returns and catching up.
• The balance owing brought instalment reminders or interest: see instalment reminders and penalties, interest and relief.