taxation of stock dividends - Marginal Tax Rates in BC. -
My_question_is: Applicable to both US and
Canada
Subject: taxation of stock dividends
Expert: taxman@centa.com
Date: Wednesday March 14, 2007
Time: 06:15 PM -0500
QUESTION:
If a single person living in canada owns u.s. stock such as at&t should that person be better off receiving his dividends in the states. THis person resides in canada for more than 183 days a year which means she will be taxed as a canadian. I realise that under canadian taxation there is to be deducted from their percentage consideration of american taxes that are executed in that country (u.s.). There is also a factor of this person's lawyer trying to control her estate from canada. By putting her dividends in a american bank instead of a canadian is this a smart move in that he will not be able to get into her estate as easily. Her dividends are around $10,000 a month and she is taxed at 82% in canada. Is this right?
___________________________________________________________Subject: taxation of stock dividends
Expert: taxman@centa.com
Date: Wednesday March 14, 2007
Time: 06:15 PM -0500
QUESTION:
If a single person living in canada owns u.s. stock such as at&t should that person be better off receiving his dividends in the states. THis person resides in canada for more than 183 days a year which means she will be taxed as a canadian. I realise that under canadian taxation there is to be deducted from their percentage consideration of american taxes that are executed in that country (u.s.). There is also a factor of this person's lawyer trying to control her estate from canada. By putting her dividends in a american bank instead of a canadian is this a smart move in that he will not be able to get into her estate as easily. Her dividends are around $10,000 a month and she is taxed at 82% in canada. Is this right?
david ingram replies:
I assume that you are a US citizen living in Canada most of the time and that it is a Canadian lawyer you are talking about.
.
I cannot comment on the situation with your lawyer. However as a non-resident of the USA and a resident of Canada, it does not matter where you have dividends deposited. The dividends and all of your world income are subject to Canadian tax at the marginal tax rate for the province you are living in.
In BC for instance there are 6 marginal tax rates
up to $33,755, you pay 21.3%
from $33,755 to 36,378 you pay 24.509%
from $36,378 to 72,756 you pay 31.185%
from $72,756 to 77,511 you pay 37.7%
from $77,511to 94,121 you pay 39.73%
from $94,121 to 118,285 you pay 40.792%
over $118,285 you pay 43.7%
Please PAY ATTENTION
Going up a tax bracket, does NOT increase the tax you have already paid.
You only pay the higher tax bracket on the next $1.00, not the dollars below.
Every province will be different but:
There is NO SUCH THING as an 82% tax rate in Canada
And, if you had ordinary Canadian Dividends, the tax rate would be half of the amount I have quoted above. In fact, if all you had was $25,000 worth of dividends in Canada, there would be NO tax at all and if you received $100,000 worth of Canadian dividends, the grossed up amount would only have $15,526.07 of tax payable.
And if you had $100,000 of Eligible Canadian Dividends, the tax on $100,000 of eligible dividends in BC is only $9,197.36.
--------------------------------------
Now, if you are an American citizen living in Canada, the maximum tax you will pay to the US is 15% under articles X and XXIV(5)(c) of the US / Canada Tax Treaty.
It is very important to take advantage of this because Canada's CRA will only allow you a tax credit of 15% tax for dividends.
When the tax credit is claimed at the amounts you are suggesting, it is a dollar for dollar deduction from Canadian Tax.
____________________________________
If you are having a problem with your lawyer, you need to deal with and get advice from a lawyer in the province in which you are living. Make sure you find a specialist in the topic you are having a problem with. But, be careful. Advertising a service does NOT automatically mean that the person is really good at that particular topic. Check around for references.
A very good method is to ask the lawyer you are having your difference of opinion for the names of two or three others you could get a second opinion from.
Another method of finding a lawyer is to phone the law society where you live. However, I do not recommend this because (in my opinion) the Law Society personnel will NOT give a recommendation based upon the best but upon who is there.
Now, for the record I spent almost three hours answering this because it was about time I figured out the marginal tax rates for this year and I figured out my own rather than using someone else's .
The good news is that Half my new roof went on today and the rest should be done tomorrow.
I am going to bed now at 12:30, the earliest in the last three weeks.
david ingram
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
$1,600 would be for two people with income from two countries
David Ingram expert income tax help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty
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Disclaimer: This question has been answered without detailed
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Be ALERT, the world needs more
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David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone consultations are $400 for 15 minutes to 50
minutes (professional hour). Please note that GST is added if product remains in
Canada or a phone consultation is in Canada.
This is not intended to be definitive but in
general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only - no self employment or rentals
or capital gains - you did not move into or out of the country in this
year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no
rental
$1,200 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,500 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely
$450
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Just a guideline not etched in
stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
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