US Citizens and Income Tax

[factoranalysis]

Had a brief convo with an immigration lawyer, and according to him, I would actually be a good fit for the Express entry program. However, I had questions about the logistics of migrating to Canada as a skiled worker:

1. As a US citizen does that mean that I would pay US income tax AND Canadian income tax? What if I continued to work for a non-Canadian company as a remote worker (that is, receive 0 Canadian income)?
2. What about my immediate family (wife and son)? I assume they immediately also get visas at the same time? What about my mother-in-law who currently lives with us (and is almost a dependent---in the legal sense)?
3. I read somewhere that there's a tech startup entry program?

Thanks!

 

[canuck_in_uk]

Had a brief convo with an immigration lawyer, and according to him, I would actually be a good fit for the Express entry program. However, I had questions about the logistics of migrating to Canada as a skiled worker:

1. As a US citizen does that mean that I would pay US income tax AND Canadian income tax? What if I continued to work for a non-Canadian company as a remote worker (that is, receive 0 Canadian income)?
2. What about my immediate family (wife and son)? I assume they immediately also get visas at the same time? What about my mother-in-law who currently lives with us (and is almost a dependent---in the legal sense)?
3. I read somewhere that there's a tech startup entry program?

Thanks!

1. Yes, you are required to file taxes on both countries. It doesn't matter if you are working for a non-Canadian company; you will be a tax resident and required to declare your world income. There is a double taxation treaty between Canada and the US.

2. You wife and son would become PRs along with you. Your mother-in-law is not in any way considered a legal dependent and cannot be included in the app. If you meet the income requirement in Canada for 3 years, your spouse could enter the lottery to sponsor her mother.

3. Not something I know much about. Read up on the IRCC website.

 

[factoranalysis]

1. Yikes, I just went to https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit/taxes-quebec/taxes-quebec-2/5.html. If i'm reading that correctly, Federal income tax is at least 26%. But then if I move to Quebec, at least another 20% gone? Holy cow! Combined with what I already pay in the US and assuming tax credits, deductions, and what not, that means I can expect 60% (= 20% + 20% + 20%) of my income gone in taxes? Something doesn't sound right. This number is too high.

 

[factoranalysis]

Just went here: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-choosing-to-take-credit-or-deduction There is a foreign tax credit. Not sure how much it is but it does not apply to the case I describe---living abroad while working for a US company.

Currently, my biggest expenses are Federal income taxes, housing, education for my son. I'll put healthcare even though it's currently not a big cost for me since it really depends on your employer.
- If I move to Canada, it seems that taxes will probably jump significantly.
- Living in the southern US, housing is probably comparable to Canada. I just compared Quebec: https://www.expatistan.com/cost-of-living/quebec-city If Quebec is one of the more expensive cities, then I might expect housing costs to decrease somewhat
- Private school probably costs the same (if offered)
- Health care permanently goes to 0... i.e., assuming Canadians don't do medical tourism (which I doubt).

The big question then is taxes (since it can possibly go up significantly) and housing costs since they might go down significantly

 

[canuck_in_uk]

1. Yikes, I just went to https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit/taxes-quebec/taxes-quebec-2/5.html. If i'm reading that correctly, Federal income tax is at least 26%. But then if I move to Quebec, at least another 20% gone? Holy cow! Combined with what I already pay in the US and assuming tax credits, deductions, and what not, that means I can expect 60% (= 20% + 20% + 20%) of my income gone in taxes? Something doesn't sound right. This number is too high.

You're not really reading it correctly. You pay the applicable tax rate for the income in each bracket. If you make $100k, you will only pay 26% on the last $9437 earned, as that falls within the 26% bracket.

Double taxation treaty. If you are earning the income in the US, you will pay your taxes in the US first. You will then file your Canadian taxes and claim credits for what you paid in the US. You would only owe the difference in taxes in Canada, i.e. if your US taxes were $10k and Canada would take $12k, you would only pay Canada the difference of $2k.

Have a look here http://www.taxtips.ca/calculator/qccalculator.htm.

 

[canuck78]

Just went here: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-choosing-to-take-credit-or-deduction There is a foreign tax credit. Not sure how much it is but it does not apply to the case I describe---living abroad while working for a US company.

Currently, my biggest expenses are Federal income taxes, housing, education for my son. I'll put healthcare even though it's currently not a big cost for me since it really depends on your employer.
- If I move to Canada, it seems that taxes will probably jump significantly.
- Living in the southern US, housing is probably comparable to Canada. I just compared Quebec: https://www.expatistan.com/cost-of-living/quebec-city If Quebec is one of the more expensive cities, then I might expect housing costs to decrease somewhat
- Private school probably costs the same (if offered)
- Health care permanently goes to 0... i.e., assuming Canadians don't do medical tourism (which I doubt).

The big question then is taxes (since it can possibly go up significantly) and housing costs since they might go down significantly

You need to do some more research. As previously mentioned there is a double taxation treaty with the US. Housing will likely be more expensive in Canada if you live in a larger city compared to the southern US (except California). Quebec city is a fairly small city that you probably wouldn't move to without a good reason. Health care costs will not be 0. Dental, vision, prescriptions, physio, etc are not covered. People often pay into a benefit program at work that covers some of the costs or can purchase a plan and pay out of pocket for things that are not covered if they work on contract or pwn their own business.

 

[factoranalysis]

You're not really reading it correctly. You pay the applicable tax rate for the income in each bracket. If you make $100k, you will only pay 26% on the last $9437 earned, as that falls within the 26% bracket.

Double taxation treaty. If you are earning the income in the US, you will pay your taxes in the US first. You will then file your Canadian taxes and claim credits for what you paid in the US. You would only owe the difference in taxes in Canada, i.e. if your US taxes were $10k and Canada would take $12k, you would only pay Canada the difference of $2k.

Have a look here http://www.taxtips.ca/calculator/qccalculator.htm.

Yea that's what I thought. So then taxes might jump modestly from 20% to 26%. However, that's just federal income tax. It does say that locales have their own income tax... what about those?

 

[factoranalysis]

You need to do some more research. As previously mentioned there is a double taxation treaty with the US. Housing will likely be more expensive in Canada if you live in a larger city compared to the southern US (except California). Quebec city is a fairly small city that you probably wouldn't move to without a good reason. Health care costs will not be 0. Dental, vision, prescriptions, physio, etc are not covered. People often pay into a benefit program at work that covers some of the costs or can purchase a plan and pay out of pocket for things that are not covered if they work on contract or pwn their own business.

Well then it seems that healthcare costs will be similar compared to my current employer (dental is expensive!) but compared to the average US employer, probably slightly less.

I think you might be thinking I live in the middle of nowhere. I live in a fairly large Southern city that's gentrifying (so way more expensive than it used to be). A quick glance at the expatistan website (if you believe it to be accurate) and what you say, it's probably fair to conclude that housing costs are similar.

So the summary is that taxes will increase anywhere from 5k to 10k for me (maybe more depending on how local income tax works), everything else will probably be similar... So it's looking like moving to Canada is a pay cut.

 

[canuck78]

Well then it seems that healthcare costs will be similar compared to my current employer (dental is expensive!) but compared to the average US employer, probably slightly less.

I think you might be thinking I live in the middle of nowhere. I live in a fairly large Southern city that's gentrifying (so way more expensive than it used to be). A quick glance at the expatistan website (if you believe it to be accurate) and what you say, it's probably fair to conclude that housing costs are similar.

So the summary is that taxes will increase anywhere from 5k to 10k for me (maybe more depending on how local income tax works), everything else will probably be similar... So it's looking like moving to Canada is a pay cut.

There is a large variability of housing costs in Canada. Quebec in general has not had a strong housing market in decades although that is changing especially in Montreal. It has still relatively reasonable housing costs compared to many places in Canada. If you look at what you can get for a million dollars in Toronto or Vancouver US citizens are usually shocked.

 

[mgnlky]

1. Yikes, I just went to https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit/taxes-quebec/taxes-quebec-2/5.html. If i'm reading that correctly, Federal income tax is at least 26%. But then if I move to Quebec, at least another 20% gone? Holy cow! Combined with what I already pay in the US and assuming tax credits, deductions, and what not, that means I can expect 60% (= 20% + 20% + 20%) of my income gone in taxes? Something doesn't sound right. This number is too high.

Something important to remember, Quebec does not participate in the Express Entry program the rest of the country does. If you apply for EE and select it as your intended destination, you won't be eligible for an ITA. You would have to apply through Quebec's program.

 

[factoranalysis]

There is a large variability of housing costs in Canada. Quebec in general has not had a strong housing market in decades although that is changing especially in Montreal. It has still relatively reasonable housing costs compared to many places in Canada. If you look at what you can get for a million dollars in Toronto or Vancouver US citizens are usually shocked.

I think you're confusing me with California or NYC money. In the south, the middle class doesn't buy million dollar houses. What's more common is spending 200-400k for a house.

As a tech worker, I would move to where all the tech jobs are... I don't know where that is in Canada but I imagine property values are increasing there!

 

[canuck78]

I think you're confusing me with California or NYC money. In the south, the middle class doesn't buy million dollar houses. What's more common is spending 200-400k for a house.

As a tech worker, I would move to where all the tech jobs are... I don't know where that is in Canada but I imagine property values are increasing there!

No I mean that people moving from some place like suburban Texas expect that housing will either be comparable or less expensive in Canada which is not the case in many Canadian cities. Many US citizens are shocked when they see how little they can get for 1 million dollars in a city like Toronto or Vancouver,

 

[canuck_in_uk]

Yea that's what I thought. So then taxes might jump modestly from 20% to 26%. However, that's just federal income tax. It does say that locales have their own income tax... what about those?

Look at the link I posted.

 

[factoranalysis]

No I mean that people moving from some place like suburban Texas expect that housing will either be comparable or less expensive in Canada which is not the case in many Canadian cities. Many US citizens are shocked when they see how little they can get for 1 million dollars in a city like Toronto or Vancouver,

Jeez! So then I get a double whammy: higher taxes and higher housing costs (as a tech worker I'll most likely need to move to one of those expensive cities).

 

[canuck78]

Jeez! So then I get a double whammy: higher taxes and higher housing costs (as a tech worker I'll most likely need to move to one of those expensive cities).

Think you probably need to do a bit more research about Canada in general. There are large regional differences like in the US. Your research about Quebec and Quebec city is not relevant unless you are moving to that exact area.