RSUs After Moving from the U.S. to Canada
When RSUs granted in the U.S. vest after you move to Canada, both countries tax them. Canada taxes the whole vest; the U.S. taxes the part earned while you worked in the U.S. Tax is often withheld twice, and the CRA regularly questions the credit because the U.S. income sits inside a Canadian T4.
At a glance:
United States – 1040-NR: U.S.-workday share only, filed first.
Canada – T4 + T2209: Full vest, credit for final U.S. tax.
Next vests – Form T1213: Cuts the double withholding.
How the vest is taxed in each country
Canada taxes it all (T4 box 14 · line 10100)
As a Canadian resident on the vest date, the market value of the shares at vesting is employment income, reported on your Canadian T4. Unlike stock options, RSUs get no 50% deduction.
The U.S. taxes its share
U.S. rules and the Canada-U.S. treaty source equity pay by where you worked between the grant date and the vest date. The part earned while working in the U.S. stays taxable there.
The credit links them (T2209)
Canada credits the U.S. tax on the U.S.-source share, up to the Canadian tax on that same income. The Canadian-source share is taxed only in Canada.
The formula: U.S. workdays ÷ total workdays (grant → vest) × vest value = U.S.-source share
Each vesting tranche has its own grant-to-vest period, so each gets its own percentage.
Worked example: one vesting tranche
Aisha received a grant on September 1, 2023 in Redmond and transferred to Vancouver on January 1, 2026. A tranche vests September 1, 2026, worth US$100,000, when US$1 costs C$1.37. About 78% of her grant-to-vest workdays were in the U.S.
Share of workdays: U.S.-source 78%; Canadian-source 22%; total 100%.
Vest value (US$): U.S.-source 78,000; Canadian-source 22,000; total 100,000.
Vest value (C$ at 1.37): U.S.-source 106,860; Canadian-source 30,140; total 137,000.
Taxed by the U.S.: U.S.-source – yes, on 1040-NR; Canadian-source – no.
Taxed by Canada: U.S.-source – yes, with credit; Canadian-source – yes; total – all C$137,000.
Illustrative. Real calculations use each tranche's actual workdays, excluding weekends and vacation, and the vest-date exchange rate.
How withholding usually goes wrong
Large employers often run both payrolls on the same vest, so the U.S.-source share has tax taken twice.
Canadian payroll: Withholds Canadian tax on the full vest, usually by selling shares to cover it, plus CPP and EI up to the yearly maximums.
U.S. payroll: Withholds U.S. federal tax on the U.S.-source share, often at the flat 22% supplemental rate (37% over US$1 million), shown on a W-2.
On a large vest, that can tie up tens of thousands of dollars until both returns are filed. Washington has no state income tax; employees leaving other states may also see state tax withheld.
Recovering the tax, step by step
File the U.S. return first. Form 1040-NR reports only U.S.-source income and sets your actual U.S. tax. Excess withholding comes back as a U.S. refund. The move year is usually a dual-status return.
Claim the credit on T2209. Net foreign non-business income = the U.S.-source share in C$. Foreign tax = the final U.S. tax from the 1040-NR, not the amount withheld. Unused credit goes to T2036.
File T1213 for future vests. Asks the CRA to let payroll withhold less on the U.S.-source share. An approval covers one tax year, so reapply while U.S.-sourced tranches keep vesting.
The most common mistake: Claiming the U.S. tax withheld instead of the final U.S. tax. If you file the Canadian return first, claim an estimate, then correct it with a T1-ADJ once the U.S. tax is final.
The CRA problem: foreign income on T2209, nothing at line 10400
Your T2209 shows foreign employment income, but it's inside your Canadian T4 at line 10100, with nothing at line 10400 and no foreign slip. The CRA's matching reads that as foreign income claimed but never reported.
Don't move the income to line 10400. That reports the same income twice. It's correctly at line 10100 through the T4; the credit just needs to be explained.
Build a sourcing schedule
For each tranche: grant and vest dates, U.S. and Canadian workdays, vest value, vest-date exchange rate, and the U.S.-source amount in C$.
Get your employer's statement
Employers with global mobility programs can often provide an RSU sourcing or mobility statement. It carries the most weight with the CRA.
Send it before the CRA asks (My Account)
After e-filing, upload the schedule, W-2, 1040-NR and employer statement through Submit documents, with a short note.
Prove the tax was paid (IRS transcript)
The CRA often asks for an IRS account transcript showing your final U.S. tax. Order it once your 1040-NR is processed.
If it's denied anyway (90 days)
Reply to the review letter with the full package. If a reassessment still removes the credit, file a Notice of Objection within 90 days. With proper sourcing documents, denials are usually reversed.
Sample note to the CRA:
"Foreign-source employment income of C$106,860 is included in T4 box 14 from my Canadian employer. It relates to services performed in the U.S. between the grant and vest dates. See the attached sourcing schedule, W-2 and Form 1040-NR."
Other points to watch
Selling the shares
Your Canadian cost is the vest-date value in C$, averaged with identical shares. The gain is half taxable in Canada. A non-U.S. citizen who has left generally owes no U.S. tax on the sale.
U.S. citizens and green card holders
You still file Form 1040 on worldwide income, claiming Form 1116 for Canadian tax on the Canadian-source share under the treaty's special rules.
Form T1135
Shares at a U.S. broker such as Morgan Stanley or Fidelity are foreign property. Over $100,000 CAD in total cost, file T1135 every year.
CPP, EI and Social Security
After the move, Canadian payroll takes CPP and EI on the vest instead of U.S. Social Security and Medicare.
Your documents checklist
T4 – from your Canadian employer: full vest in box 14 and Canadian tax withheld.
W-2 – from your U.S. employer: U.S.-source share and U.S. tax withheld.
Vesting statements – from your stock plan broker: grant date, vest date, shares and value per tranche.
Sourcing statement – from your employer mobility team: the U.S. and Canadian split in the employer's numbers.
Sourcing schedule – from you or your preparer: workdays, exchange rates, U.S.-source amount per tranche.
1040-NR – from you or your preparer: your final U.S. tax, the basis for the credit.
IRS transcript – from the IRS: proof the U.S. tax was assessed and paid.
T2209 / T2036 – from your Canadian return: the foreign tax credit claim.
T1213 approval – from the CRA: less withholding on future U.S.-sourced vests.
Talk to Icantax
We prepare the U.S. and Canadian returns together for employees who transfer across the border, build the RSU sourcing schedule for each tranche, file Form T1213 to cut double withholding, and handle CRA review letters on foreign tax credits.
Call 604-496-2200 or email info@icantax.ca — Unit 110 - 13575 107A Avenue, Surrey, B.C.
General information, not tax advice for your situation.Content coming soon.
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