Are unvested RSUs or stock options subject to Canada's departure tax when I move to the US?

No. Under Income Tax Act s.128.1(4)(b)(iii), rights to acquire shares under an employee stock option or RSU agreement are excluded property and are not subject to the deemed disposition on departure. Instead, Canada taxes its pro-rata share of each future vest or exercise based on the fraction of grant-to-vest workdays performed in Canada.

How do Canada and the US split tax on RSUs granted in one country that vest after I move to the other?

Under the OECD commentary to Article XV of the Canada-US Tax Treaty, CRA Income Tax Folio S5-F2-C1, and US Treasury Reg. 1.861-4(b), employment equity is sourced by the ratio of workdays between the grant date and the vesting date (for RSUs) or exercise date (for stock options). The country where you live at vest taxes 100% of the vest as a resident and grants a foreign tax credit for the source tax paid to the country where you worked during the grant-to-vest period.

Cross-Border RSUs and Stock Options: How Equity Grants Are Taxed When You Move

~8 min read·Updated November 2026

Calculator:Offer & Relocation Comparator: compare total CAD vs. USD compensation after federal, state/provincial, and payroll taxes.

If you work in tech, finance, or biotechnology and transfer from a Canadian office to a US office (or move back to Canada), you almost certainly cross the border holding unvested Restricted Stock Units (RSUs) or employee stock options. Those unvested grants are not taxed on the day you move, but every future vest that spans your move date is treated as cross-border hybrid employment income, sourced partly to Canada and partly to the US based on the exact number of workdays between grant and vest.

Why unvested RSUs and options escape departure tax, then get taxed at vest

When you cease Canadian tax residency, Income Tax Act s.128.1(4)(b)(iii) explicitly exempts employee stock options and rights under employee equity plans (like unvested RSUs) from Canada's departure-tax deemed disposition (see Canada's Departure Tax, Explained). Instead, once you hold shares that have already vested before your departure date, those vested shares are ordinary capital property subject to departure tax; unvested awards wait until they actually vest (for RSUs) or are exercised (for stock options).

The Grant-to-Vest workday fraction

Both the CRA (under Income Tax Folio S5-F2-C1 and Article XV of the Canada-US Tax Treaty) and the IRS (under Treasury Regulation §1.861-4(b)) allocate each RSU tranche's vesting value using a workday ratio from the grant date to the vesting date:

Worked example: moving from Toronto to Seattle mid-grant

Suppose your company grants you an RSU tranche on January 1, 2025 that vests two years later on January 1, 2027 (500 total workdays), and you relocate from Toronto to Seattle exactly halfway through on January 1, 2026 (250 Canadian workdays, 250 US workdays). On January 1, 2027, the tranche vests at a fair market value of US$100,000:

Canadian-source employment income (50%): 250 ÷ 500 × $100,000 = US$50,000 (taxable to Canada on a non-resident T1 return under ITA s.115(1)(a)(i) because it was earned while working in Canada).

US-source employment income (50%): 250 ÷ 500 × $100,000 = US$50,000 (earned while working in Seattle).

How double taxation is prevented: Because you are a US tax resident on the January 1, 2027 vesting date, your US Form 1040 reports the entire US$100,000 vest, and you claim a Foreign Tax Credit on IRS Form 1116 (general category) for the Canadian tax paid on the US$50,000 Canadian-sourced half.

⚠️Dual payroll sell-to-cover withholding can temporarily take 65% to 80% of your vest

When an employee transfers internally (e.g., from the Canadian subsidiary to the US parent of the same company), global equity payroll systems frequently withhold full Canadian T4 tax and full US W-2 tax on the same RSU vest unless a payroll withholding waiver (such as a CRA Regulation 102 waiver or a split-withholding calculation) is in place. You ultimately get the excess withholding back when you file your returns and claim Form 1116 / Form T2209 foreign tax credits, but it creates a severe cash-flow tie-up until tax season.

What is different about Stock Options (ISOs vs. NSOs and the 50% Canadian deduction)

For employee stock options, the sourcing period runs from the grant date to the exercise date (under the OECD and Fifth Protocol Diplomatic Notes to the Canada-US Tax Treaty). Two cross-border traps show up frequently with options:

US Incentive Stock Options (ISOs) get no special treatment in Canada: In the US, exercising an ISO doesn't trigger regular income tax (only potential AMT) if you hold the shares. In Canada, there is no ISO concept: exercising an ISO while resident in Canada (or with Canadian grant-to-exercise workdays) triggers immediate taxable employment benefit income on the spread between exercise price and fair market value.
Canada's 50% stock option deduction (ITA s.110(1)(d)) has a $200,000 annual vesting cap: For non-CCPC employers (including major public tech companies), only the first CA$200,000 of options vesting per year (measured by the fair market value of the underlying shares at grant) can qualify for Canada's 50% stock option deduction, and the IRS provides no equivalent 50% deduction on your US return.

📋Export your full grant-by-grant vesting schedule before changing payrolls

Before your internal transfer or move date, download a PDF/CSV of every active RSU and option grant showing the exact grant date, vesting schedule, and share count, and log your exact physical workdays in Canada vs. the US each year. You will need that workday log for every year until the last pre-move grant finishes vesting (typically up to 4 years after your move).

Grant-to-vest sourcing & tax return reference

Move Direction	Sourcing Formula	Primary Tax Return	Foreign Tax Credit Return
Granted in Canada → Vested in US	Canadian Workdays ÷ Total Grant-to-Vest Workdays	CRA taxes the Canadian-sourced fraction on a non-resident T1 (Schedule A) via T4 payroll withholding.	IRS taxes 100% on Form 1040 Line 1a; claim CRA tax paid on Form 1116 (General Category).
Granted in US → Vested in Canada	US Workdays ÷ Total Grant-to-Vest Workdays	IRS taxes the US-sourced fraction as ECI on Form 1040-NR Line 1a.	CRA taxes 100% on resident T1 Line 10100; claim IRS/state tax on Form T2209 / Line 40500.
Post-Vest Sale of Shares	100% Sourced to Country of Residence at Sale	Taxed as a capital gain on Schedule D (US resident) or T1 Schedule 3 (Canadian resident).	Track separate USD cost basis (vest FMV) and CAD ACB (vest FMV / arrival-day step-up under ITA s.128.1(1)).

Not tax, legal, or immigration advice: RSU/option sourcing and split-payroll W-2/T4 reporting require exact workday logs and Form 1116 / T2209 coordination; review your equity schedule with a cross-border CPA. Compare your total CAD vs. USD offer compensation on the Offer & Relocation Comparator and check your move-year filing rules in Dual-Status Tax Year: Filing Your First Year in the US.