QUESTION: I'm an American considering an employment opportunity in Alberta. Do you have a checklist of USA/Canadian tax issues I should take under consideration. Thank you -------------------------------------------------------- david ingram replies: This was plucked out of the automatic reject list - I hope you get something out of it. Sorry, no checklist - I have been doing this for 45 years now and have never seen a checklist for a move to Canada. There were a couple of stabs at ones to the states but they disappeared rather quickly Your new phone provider in Alberta will likely be TELUS and They have a great moving spot for within Canada or the US for that matter at http://promo2.telus.com/tm/07/q2/move/plan-your-move/ If what you are concerned about is the tax rate, I can tell you that a single person pays more tax in California or New York state than in Alberta but more in Alberta than in Florida, Washington, Texas, Alaska, Nevada, New Hampshire or Tennessee. .The following may be of interest and of course, when it is time to do your US / Canada returns, you know where to send them. Please note that there was a fairly large exchange difference when these were done and the figures would be more in favour of Canada now. ----------------------- taxman at centa.com: Please see bottom of message if you wish to unsubscribe. ------------------------------------------ -------------------------------------------------------------------------------- AMENDED Good to talk to you last week. My husband (a dual American/Canadian citizen) is being offered a job in OTTAWA and/or a significant promotion in Boston. We are trying to get a feel for monthly income after we pay taxes, equivalent mortgages and gain equivalent retirement savings. Boston 1) Salary 275K 2) Employer contribution to 403(b) 7.5% to SS maximum (102K) then 12.5% up to 230K (=$23,650) We contribute the max of 15,500 to both a 403b and a 457 plan 3) Our mortgage is approx. $525,000 at 6.0% and property taxes about $4500. OTTAWA: 1) Salary range 350 - 400K (offer is pending) 2) No employer contribution to retirement. For the sake of comparison, have us contribute an equal amount to our retirement as we would get from the U.S. employer ($23,650) + the 31K contribution we plan to make in the U.S. Since the RRSP limit is 20K x 2, then $14,650 would be after tax dollars contributed to some other retirement savings vehicle. (Let me know if you agree with this approach.) 3) Assume the same mortgage and property taxes. We are a married couple with 2 children ages 7 and 15. I am a self-employed REALTOR operating with a small net loss. Assume my income is 0. How would the numbers change if I earned 50K in each location? Thanks for your help! ------------------------ I have found this because you gave me the date - for some reason or other, it did get spammed out. Should not have with the subject as it was but did anyway. Sorry I was busy when you called twice. Gillian was correct, I should have been finished sooner, BUT. Have just sent the people away to come back on Wednesday - what should have been about five hours has now turned into about 20 with us going back and redoing everything for two countries and the state of California for 2003 on including an immigration to Canada return. ------------------------------------------------------ With regard to your question it is almost impossible to compute in a meaningful way. To be really accurate, relative costs of medical, housing, car insurance, food and schooling should be taken into account. The systems are different with fewer options for tax deductions in Canada in specific funds such as your 403(b) or 401(K) or 457 without an employer participation. It is further confused by the fact that you have to have a year's income into the Canadian system before you can contribute to an RRSP and then are limited to 2007 $19,000 2008 $20,000 2009 $21,000 2010 $22,000 TORONTO If, your husband started in Toronto on Dec 15, 2007 for instance and made $20,000 for 2007, his deductible RRSP limit for 2008 would be 18% of the $20,000 or $3,600. If he then worked all of 2008 and earned $400,000, his deductible RRSP limit for 2009 would be $21,000 and 2010 would be $22,000 So, for the first year, there is virtually NO deduction amount fro you in Canada unless you were make investments in Limited Liability Partnerships or Flow Through Shares. However, for the most part, i would suggest that you would get a bigger return for your money in Canada by paying the tax and taking the balance to pay down the mortgage which is not deductible automatically in Canada. Mortgage interest deductibility in Canada 'can' be done over time with leveraged investments and you can find out more about that subject by going to www.centa.com and reading the November 2001 Newsletter in the top left hand box. At a $400,000 single income in Toronto in a first year, Craig would owe about $165,000 of tax to Canada and Ontario and he would have also paid about $3,000 more in payroll taxes for CPP (Canada Pension plan) and EI (Employment Insurance). He would be in about a 45% tax bracket in Ontario for 2008. therefore, every $10,000 he could reduce his taxable income would save him $4,500 in income tax until he was down to about $120,000 in which case, the marginal tax bracket would reduce. He might try and get his employer to start a pension plan for him and reduce his income by the amount they put into the plan in that first year. However, barring that, he would have $400,000 - $168,000 or $232,000 to spend for mortgage, savings, food, heat, light, etc at a $400,000 salary with Tammy having no income. If you were to earn $50,000, your husband would lose you as an exemption amount and he would owe about $1,850 more tax than above. Assuming you were self employed, you would owe Canada and Ontario approximately $13,400 in income tax and Canada Pension Plan. this is much lower than the amount you would owe in Boston as you will see. --------------------------------------------------------------------------------------------------- Boston I have assumed that your example of $31,000 into the 403(b) and 457 have come off the $275,000 leaving $244,000 taxable. With these figures, your MA State tax would be about $11,930. Your Federal Tax would be about $43,050 and you would have had about $9,400 deducted for Medicare and Social Security for total deductions from the $244,000 of $64,400 and you would have $179,600 left after taxes and deductions to spend for mortgage, savings, food, heat, light, etc To this $179,600 you could add about $21,000 (after tax from your savings) AND another $14,000 after tax from the Employer contribution of $24,000 or so for your total available. Maybe $214,600 of real cash after taxes including the savings. This compares with the $232,000 left after tax above in Canada -------------------------------------------------- If Shirley was to earn $50,000 in after expense profit from her business, it would increase the Federal US taxes to $59,100 from $43,050 or $16,000 of Federal Tax. The MA state tax would increase from $11,930 to $14,500, an increase of $2,570 or a total of $18,570 of tax but there would also be a Social Security payment of $7,065 for a total of Fed Tax, MA tax and FICA and Medicare of $25,635 of taxes on a profit of $50,000 and that is more than 50%, a figure never met in most of Canada anymore.. -------------------------- This will likely surprize you since most people automatically believe that Canadian taxes are higher than US taxes. That is not always so as this other, older comparison of smaller salary amounts also shows. And, If you will let me re-arrange your affairs to make your Canadian mortgage deductible, the Canadian tax is always lower if you live in a Taxed state. Living in Florida, Washington, Alaska, Nevada, etc, where there are no state income taxes does change the figures dramatically. In your example, for instance, if you were living in New Hampshire which does not tax wages, the Federal tax would be $3,000 higher (No state income tax as a deduction) but your overall tax bill would be $8,000 lower on hubby's salary. Your self employment would attract income tax however. Remember that this exercise starts off with the Canadian company paying $100,000 more than the US company which is really paying $275,000 plus the $23,650 pension and that is as close to $300,000 as you are going to get. The costs with one high and one low or zero salary in Canada accentuates the advantage of a joint tax return. However, as described you would have more after tax dollars left over in Canada than in the USA in the situation you put forward for analysis. ------------------------------------------- Older questions and comparisons. David, I am a U.S. citizen and resident, married to a (non-working) dual U.S.-Canadian citizen. I recently learned that the company where I've worked for the last 20+ years is closing its doors near the end of this year. I'm 55 and can't get my pension for at least 5 years...10 years if I want a full pension. We've been thinking of the idea of moving across the border to Canada (wife would sponsor me), and I have a question. Would it make any sense tax-wise for me to live and work in Canada, pay into CPP for 5 or 10 years? I understand that Canadian taxes are higher than in Michigan, and I have mutual funds and other savings that are generating about $10,000 in yearly interest/dividends/capital gains that I would be leaving in the U.S. Thanks, ________________________________________________________________ david ingram replies: As an esoteric exercise, I decided to see what the difference actually was because Canadian taxes are NOT always higher than the US, particularly where two spouses have equal earnings. The big difference is that the US has a joint tax return rate and when one spouse works an the other does not, a discrepancy does arise. I used a US salary of $60,000 and a joint 1040 and MI 1040. I did not use any deductions other than the standard deduction and did not claim for any children. The results were US fed tax of 5.714 MI tax of 2,083 FICA 3,720 Medicare 870 For a total of 12,387 which converts to $14,048.02 in Canadian funds If you had lived in Detroit, the city tax would be $1,470 changing the figures to a total of $13,857.00 US or $15,715.14 Canadian I converted the $60,000 to $68,045.62 Canadian The results were Cdn Fed tax of 9,581.69 ON tax of 4,659.14 CPP of 1,910.70 EI of 729.30 for a total of 16,880.83 which converts to $14,884.86 in US funds The difference is $2,497.86 or about $200 a month. if you did not move from a Michigan city with a tax return or a difference of (14,884.86 - 13,857) $1,027.86 if you moved from Detroit Then - (I was intrigued) I tried it with you both receiving $30,000 US The results were US fed tax of 5.714 MI tax of 2,083 FICA 3,720 Medicare 870 For a total of 12,387 which converts to $14,048.02 in Canadian funds and $1,470 Detroit tax 'IF' There is no change Then I decided to show what would happen to a couple who moved to Canada and both worked equally. I converted the $60,000 to $68,045.62 Canadian but split it into 2 returns of $34,022.81 The results were Cdn Fed tax of 3,474.97 x's 2 or 6,949.94 ON tax of 1,721.67 x's 2 or 3,443.34 CPP of 1,510.88 x's 2 or 3,021.76 EI of 636.23 x's 2 or 1,272 .45 for a total of 14,687.49 which converts to $12,950.86 in US funds and is only a difference of 12,950.86 - 12,387 or $563.86 or less than $50.00 a month AND qualifies your wife for her own CPP. Of course, if you moved from Detroit to Windsor, you would be paying ($13,857 - 12,950.86) $906.14 LESS living in Canada. For the record, I would normally charge a minimum of $400 Cdn for this 'what if' calculation and your question was rejected originally along with another 100 or so. However, it caught my eye and I decided to use it as a major answer. The investment part of your income will also cause some differences because Canada will tax the dividends and capital gains differently,likely a little more. However, if you switched your accounts to Canadian securities, the tax may be a little less because of Canada's dividend tax credit. If this did not give you the answer you wanted, ignore the following. If this 'is' what you wanted, you can send a check for $450 to david ingram' US / Canada / Mexico tax, Immigration and working Visa Specialists 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 -------------------------------- -- SUGGESTED PRICE GUIDELINES - Aug 5, 2008 david ingram's US / Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists My Home office is at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 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) expert US Canada Canadian American Mexican Income Tax service help. email to taxman at centa.com www.centa.com www.david-ingram.com pert US Canada Canadian American Mexican Income Tax service and help. David Ingram gives expert income tax service & 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 $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert US Canada Canadian American Mexican Income Tax service and help. This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return. $900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year. $1,200 would be the same with one rental $1,300 would be the same with one business no rental $1,300 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. $1,600 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 $1,700 would be for two people with income from two countries $3,000 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 $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00 With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250. A Business for $400 - Rental and business likely $550 to $700 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 $900 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. Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable. In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years. We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files. As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files. It can take us a valuable hour or more to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. This is a guideline not etched in stone. If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully. --IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.-- -Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com or www.garygauvin.com. If you forward this message, this disclaimer must be included." - ----- -------------- next part -------------- An HTML attachment was scrubbed... URL: http://www.centa.com/CEN-TAPEDE/centapede-us/attachments/20080805/707634fa/attachment-0001.html
