Moving to the US from Canada.

US Citizen moving to Canada - Tax Situation - need ideas and suggestions!?

• My wife , kids and I are US Citizens moving to Toronto since my wife has a new job there. I currently do not have a good comfort level of understanding of how the taxes can be worked out. Here is our situation: - wife - US citizen living in and working in Canada - myself - US Citizen living in Canada and employed by and working for a US Firm in US. I will be commuting. We will be selling our current property in US. Ideas / Suggestions ? Thanks, S

• Answer:

  I agree with much of what Ontario CGA says. Canada taxes on residency while the U.S. taxes on both residency and citizenship. As a consequence of this, and the many expats in Canada, all of the major accounting firms have U.S. tax experts who can address Americans' tax situations in Canada. Many of these experts are expats themselves. You should also note that in Canada, most personal tax work is done by accountants, not lawyers. Yours is a complex scenario. As the facts are laid out, you would both be residents of Canada since that is the only place you have a permanent home. If you were to maintain a home in the U.S., there is at least some chance of avoiding Canadian residency for you. The Canada-U.S. tax treaty allows you to be resident of only one country and has a "tie breaker" provision that might allow you to argue that you are more of a U.S. resident than a Canadian resident (though your wife would still be a Canadian resident since she lives and works in Canada). The benefit of avoiding Canadian residency is that your U.S. earnings would not be taxed in Canada, which generally has a higher rate. Of course, having a second residence may cost more than the incremental tax. Avoiding Canadian residency is not as easy as an initial post suggests, so I would seek professional guidance. In international tax, the general rule is that the country in which the income is earned has the first right to tax it. For your scenario, the U.S. earned income exclusion, currently $82,400 U.S., would shield much of your wife's income from U.S. tax, and filing jointly would lead to a fairly low U.S. tax rate overall. Thus, in most scenarios, you will not pay tax on the same dollar of income in both countries because the U.S. would provide a foreign tax credit for any taxes paid in Canada on your wife's earnings that were not covered by the exclusion, and Canada would provide a credit for U.S. taxes on your income if you are a Canadian resident. If you are considering whether to avoid Canadian residency for tax purposes, another issue to consider is would this disqualify for Ontario's medical coverage (I assume you are a legal immigrant)? I don't know the answer to this. Best of luck