My_question_is: Applicable to both US and Canada
Subject: us citizen, resident canda -work in us
Expert: taxman at centa.com
Date: Wednesday February 08, 2006
Time: 11:27 AM -0800
QUESTION:
We are thinking of moving back to canada.
We would live in canada and my wife would work in the usa. I understand we
would pay tax to usa and the difference of any due to canada. What about
tax credits, and 401 k contributions? I have figured we would owe Canada
about $14000 in extra taxes. Is there something you can do with RRSP's?
===========================
david ingram replies:
There is not enough information to answer this question and I am so busy I
have rejected about 100 in the last three days.
I have added your name to my email list and your answer may (will likely)
come up in another post. I am not answering follow up emails at this time of
year unless they come from my existing paying clientele
However, in general, you would continue to file a joint US tax return and
unless the border state is Alaska (unlikely) or Washington, you would also
file the respective state return as well. Your wife should NOT participate
in a 401K plan because Canada will not recognize it as a deduction and both
countries will tax it when it comes out, Your wife should arrange to get
the company's share of their contribution to the 401K and then your wife
should buy a Canadian RRSP if she wants a tax deduction. However, I can
prove mathematically that you would be better off to take cash and pay down
your non-deductible mortgage and use a leveraged investment plan for
retirement purposes.
There is NO joint return in Canada. When your wife prepares her Canadian
return, she will claim credit for the Federal and state taxes paid AND the
FICA and Medicare taxes paid.
Hope this gives you some ideas. If you do a search at www.centa.com you can
find all sorts of prior comments about why you should not buy an RRSP or
participate in a 401K if you are working cross-border.
==========================================
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