Mar 26, 2026
When Blue Jays pitcher Kevin Gausman signed a five-year, US$110 million deal to play in Toronto, he faced a tax problem that hundreds of thousands of Canadians navigate in smaller, everyday ways.
Remote workers employed by U.S. companies, freelancers with American clients, cross-border commuters — all are living inside one of the most misunderstood tax relationships in personal finance: the Canada-U.S. tax treaty.
What the Canada-U.S. Tax Treaty Actually Does
The treaty exists to prevent Americans and Canadians from being taxed twice on the same income. Both countries allow a foreign income tax credit for taxes paid to the other, so in most cases you won’t pay full rates in both countries (1). But treaty protection is tied to your residency status, and that’s where things get complicated.
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What tax does Blue Jays pitcher Kevin Gausman owe the CRA?
In Canada, your tax obligations are based on your residency status, not your citizenship. That means anyone who lives and works in Canada must pay Canadian income tax — regardless of their citizenship.
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In theory, Blue Jays pitcher Kevin Gausman would owe approximately C$16.3 million to the CRA on an annual income of C$30.5 million (the Canadian equivalent of one-fifth of his contract).
The CRA determines residency by examining ties to the country: whether you have a home in Canada, your spouse or dependants live here, and you hold Canadian bank accounts or retirement savings plans. Turns out significant ties can override treaty protections (2).
What tax does Blue Jays pitcher Kevin Gausman owe the IRS?
The U.S. handles tax differently. The Internal Revenue Service (IRS) collects tax based on both residency and citizenship.
In theory, Gausman would owe the IRS about US$8.95 million on his annual US$22 million income.
Thankfully, the Canada-U.S. tax treaty prevents double taxation, allowing Canadian residents — including Gausman — earning U.S. income to claim credits in either country.
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Canada’s 183-day rule: Why it's not a clean out
Many cross-border workers believe staying under 183 days in Canada keeps them off the CRA’s radar. For employees in cross-border leagues like MLB or the NHL, that’s partly true — the CRA only taxes Canadian-sourced income if they spend more than 183 days here (3).
But this rule has limits.
Independent contractors don’t qualify for this exemption. According to Cardinal Point Wealth Management, independent contractors may owe Canadian tax on all income earned from Canadian activities, regardless of days spent in Canada (4).
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For U.S. citizens living and working in Canada — like Gausman and other professional athletes — road games and U.S. spring training don’t count as Canadian activities, so no tax is owed on income earned from these activities.
For Canadians working remotely as contractors for U.S. companies, the contractor/employee distinction matters significantly.
Ontario's tax rate is among the highest in North America
If the CRA determines you’re a Canadian resident, you’ll face combined federal and provincial tax rates.
According to TurboTax Canada’s 2025-26 calculator, the combined federal and Ontario marginal rate reaches 53.53% at the top bracket (5) — putting Gausman in the highest tax bracket.
Even at lower incomes, a Canadian resident earning US$80,000 from an American employer could face a larger-than-expected tax bill without careful residency planning.
What can reduce the tax you owe?
Cross-border tax planning isn't exclusively for athletes. Several tools and strategies apply to Canadian residents earning U.S. income.
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Track days carefully. The CRA and the IRS both use time-in-country as a key variable. Keeping detailed records of time spent in Canada can help prevent unintended deemed-residency status, according to Cardinal Point Wealth Management (6).
Understand your employment classification. The employee-versus-contractor distinction significantly changes your treaty eligibility. If you're classified as an independent contractor providing services to a U.S. client, your Canadian tax exposure may be broader than you expect.
Use registered accounts where you can. Canadian residents — even those earning in USD — can contribute to a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) based on Canadian-sourced income, reducing taxable income here. Note that RRSP and TFSA rules and limits are set annually by the CRA.
Get cross-border advice before you file. The Canada-U.S. tax treaty has treaty tie-breaker rules that can establish non-residency even for people with Canadian ties, but those rules require a formal assessment. According to Rotfleisch & Samulovitch P.C., a Canadian tax law firm, the legal analysis is nuanced enough that professional athletes and high-earning cross-border workers are advised to seek guidance from a Canadian tax lawyer (7).
Final thoughts
Gausman has said he and his wife talk often about how lucky they are to have made the right decision in coming to Toronto. From a lifestyle perspective, that's clearly true. From a tax perspective, the decision required careful planning — the kind that most Canadians earning cross-border income don't realize they need until after the fact.
If you work in Canada, live in Canada, or hold significant ties here while earning U.S. income, the CRA will have an opinion about what you owe. Talking to a qualified cross-border tax adviser before you file — not after receiving a reassessment notice — is the only way to know where you actually stand.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Canada Revenue Agency (1); Turbotax: The USA/Canada Tax Treaty Explained (2, 7); Rotfleisch & Samulovitch P.C. via Mondaq (3); Cardinal Point Wealth Management (4, 6); TurboTax Canada (5)
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Romana King is the Senior Editor at Money.ca. She writes for various publications, and her book -- House Poor No More: 9 Steps That Grow the Value of Your Home and Net Worth -- continues to be an Amazon bestseller. Since its publication in November 2021, this book has won five awards, including the New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award in 2022.
