Wealth Tax in Canada: What High-Earning Expats Need to Know

Canada’s ongoing debate over taxing wealth is putting high-earning expats on alert. If you have substantial assets or investments, understanding how a potential wealth tax in Canada might affect your finances is essential. Here’s what top-earning American expats need to know—and why smart planning matters more than ever.

Current status of wealth tax in Canada: What high-net-worth individuals need to know

As of 2025, Canada does not have a federal wealth tax. Unlike some European countries that levy annual taxes on net worth, Canada’s tax system focuses primarily on income, capital gains, and certain provincial taxes. However, the topic of a wealth tax in Canada is frequently debated in political and economic circles, especially as concerns about wealth inequality grow.

What is a wealth tax?

A wealth tax is a recurring tax on an individual’s net worth—typically including cash, investments, real estate, and other assets—rather than on income or capital gains. While Canada currently does not impose such a tax, it’s important to stay informed, as policy discussions could lead to changes in the future.

Are there any related taxes?

While there is no formal wealth tax in Canada, high-net-worth individuals should be aware of:

• Property taxes: Levied by provinces and municipalities on real estate holdings.
• Capital gains tax: Applied when you sell investments or property at a profit.
• Provincial surtaxes: Some provinces have additional taxes for high-income earners.

Understanding Canadian tax residency rules for U.S. expats

Before you can assess your tax obligations, you need to determine if you’re considered a Canadian tax resident. Canada taxes residents on their worldwide income, so your residency status has a major impact on your tax situation.

How is tax residency determined?

Canada uses a combination of primary and secondary ties to determine residency:

• Primary ties: Where your home, spouse or common-law partner, and dependents are located.
• Secondary ties: Personal property, social connections, Canadian bank accounts, and more.

If you establish significant residential ties to Canada, you’ll likely be considered a resident for tax purposes—even if you maintain U.S. citizenship.

The U.S.-Canada tax treaty

The U.S. and Canada have a tax treaty to help prevent double taxation. However, the rules can be complex, especially for high-net-worth individuals with cross-border investments. Professional guidance is highly recommended to ensure compliance and optimize your tax position.

How Canada’s income tax system affects wealthy expatriates

Canada’s income tax system is progressive, meaning higher earners pay a higher percentage of their income in taxes. For high-net-worth U.S. expats, understanding how Canadian income tax works is essential for effective planning.

Federal and provincial taxes

• Federal tax: Rates increase with income, topping out at 33% for the highest earners.
• Provincial tax: Each province adds its own tax, with top rates varying by location. For example, Ontario’s top combined rate can exceed 53%.

What income is taxed?

Canadian residents are taxed on their worldwide income, including:

• Employment income
• Investment income (interest, dividends)
• Rental income
• Capital gains

Foreign Tax Credits

To avoid double taxation, Canada allows credits for foreign taxes paid, such as U.S. taxes. However, the rules are nuanced, and not all income types are treated equally. For example, the U.S. taxes its citizens on worldwide income regardless of residency, so careful coordination is needed.

Capital gains tax implications for high-net-worth U.S. expats in Canada

While Canada doesn’t have a wealth tax, capital gains tax is a key consideration for wealthy expats. Here’s what you need to know:

How capital gains are taxed

As of June 25, 2024, the inclusion rate for capital gains has increased:

• For individuals, the first $250,000 of gains in a year is taxed at a 50% inclusion rate.
• Capital gains above $250,000 are taxed at a 66.67% (two-thirds) inclusion rate.
• For corporations and most trusts, the inclusion rate is now 66.67% on all capital gains.

Principal residence exemption

If you sell your primary home, you’re exempt from capital gains tax on the sale. However, this exemption does not apply to investment properties or vacation homes.

Cross-border considerations

U.S. expats must also report capital gains to the IRS. The U.S. does not offer a principal residence exemption as generous as Canada’s, and currency fluctuations can create additional taxable gains in the U.S..

Take control of your cross-border tax strategy

Navigating the Canadian tax landscape as a high-net-worth U.S. expat doesn’t have to be stressful. With the right guidance, you can protect your wealth, stay compliant, and make the most of your international lifestyle. Ready to simplify your tax situation and gain peace of mind? Our expert team is here to help you every step of the way.

Frequently Asked Questions