I'm moving to the US from Canada. I will be paid a bonus at the new job. How do I not get taxed in Canada?
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When you complete your tax returns how does each country tax you on your marginal rates? Assume I earn $100K in Canada over seven months and $200K in the US over five months - does making more money in the US cause higher tax rates in Canada? What if I made $10K in Canada and $300K in the US - I assume I would not get "welfare benefits" in Canada. How is a split year calculated? Am I better to push bonuses into the next year so I don't get hit with Canadian tax?
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Answer:
Canada taxes on residency. Residents are taxed on worldwide income, while non-residents are taxed on Canadian income only. The factors that determine in the eyes of CRA whether you are still a resident are many: family and social ties, homes, bank accounts, drivers licenses, health cards, etc... If you are NOT a PERMANENT resident of the US (with a green card or citizenship), you are automatically treated as a Canadian Resident for tax purposes. Your new job bonus would be therefore taxed in Canada. http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html http://www.cra-arc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html You will receive a Foreign Tax Credit in Canada for any taxes paid to the US. This has nothing to do with the US-Canada Treaty. http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns409-485/405-eng.html If it works out better, you can claim the Overseas Employment Credit: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns409-485/426-eng.html
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Other answers
U.S and Canada have a tax treaty. If you pay income tax in Canada, you would get a foreign tax credit against tax you would normally owe the U.S. So you should not get double taxed. But I do not know how that ends up for a part year resident, because the only Canadian income I had with Canadian withholding was distributions from shares of a gas/oil royalty trust. So your total tax might equal whichever country has the higher tax rate. You may also have part year state tax to figure out.
efflandt
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