Canada bound?
Americans working in Canada 1/12/2009 12:48AM Reply | Return to Index | Report Post
I'm considering a job working in Canada, but I having difficulty understanding the tax implications of working there as an American. Perhaps someone here has done this or knows the rules.

How is income from jobs taxed in Canada? Is there provincial tax as well as national tax? Do I have any tax obligation in the US for the money I earn in Canada (I'll be living in Canada too)? Is there a such thing as tax deductions for housing like in the States? What can you do with your Canadian pension when you return and eventually retire back in the US?

Are there any other questions I should be asking myself????

Thanks for the help. The miracle of letsrun is no matter how obscure the subject, there's always a runner who knows.
Off the Grid
RE: Americans working in Canada 1/12/2009 1:00AM - in reply to Canada bound? Reply | Return to Index | Report Post
more significantly, if you are there for 3 years out of the next five, you are entitled to apply for citizenship and a passport, which is gold...

For US tax credits, u get a US$84k (?) deductible, along w/ certain housing expenses etc, to determine your adjsuted gross income. Then you tax liability (both regular and AMT) is caluclated, and netted off against a % of foreign tax paid. Unused tax credits can be carried forward 10yrs (?)
I am not an accountant, but I give one a hard time every year.

The expensive way is to get PWC to handle both local and US taxes. The cheap way is to get a local accountant to handle Candaian tax, then send the docs to a US accountant who has experience w/ foreign tax filings.

Also you get an automatic 2 month extension to June 15th, and can file for an automatic extension to October 15th. So there is always plenty of time to sort the whole thing out first time around.
just a girl
RE: Americans working in Canada 1/12/2009 1:00AM - in reply to Canada bound? Reply | Return to Index | Report Post
Canada's tax system is similar to the U.S's in what is taxed and what isn't. Yes you pay federal and provincial taxes, but you file the forms together. There is no tax deduction for home mortgage interest. If you get a Canadian pension it's still yours when you move back to the U.S., but it will be partly taxed in Canada.

As an American you have to file U.S. income tax whereever you are on whatever income you earn in the world (even if you are not a U.S. resident. There are tax treaties and deductions that prevent you from being doubly taxed on income, but there are some tricky situations so you might need help for this.

Overall, there are way more things to consider about whether or not to work and live in Canada-- the tax issues will work themselves out. Generally Canada is a great place to live but there are huge differences across the country.
Canada bound?
RE: Americans working in Canada 1/12/2009 1:45AM - in reply to just a girl Reply | Return to Index | Report Post
Thanks Off the Grid and Just a Girl.

That's very informative. The reason I'm hung up on the taxes is I don't want to leave my current job for a major pay cut just because I don't understand the tax situation. Either way, my taxes next year will be a mess!

Off the Grid, to follow up on your comment about citizenship, I have the opportunity to be at this job as long as I like, so this would be an option. Would Canadian citizenship allow me to live in work in the commonwealth countries? Would I have to give up my US citizenship? I heard of some guy getting citizenship in Italy, which to his surprise required service in the Italian army! Is there any thing like that to be aware of?

Just a Girl, what are some of the other things I should be considering?

One more thing, what usually happens with health care? Who is eligible for national health care? Are foreign nationals working in Canada eligible?
Off the Grid
RE: Americans working in Canada 1/12/2009 1:54AM - in reply to Canada bound? Reply | Return to Index | Report Post
before you take the job, be sure to get a "tax equalization" clause inserted in your contract.
In the US, if your effective rate is 30%, and you move to Paris where the effective rate can be +60%, you are stuffed. Tax equalization ensures you have $70 after tax, regardless of the tax regime. The downside to this is higher compensation in higher tax countries, so this might trigger larger AMT liabilities. Obviously in a low tax country (e.g. Hong Kong), tax equalization sucks. Speak to a tax and benefits consultant for the full skinny.
As far as citizenship, ask immigration Canada. It depends what type of landing status you will have. Check out their website. Keep in mind that the emigration procedures for Quebec are a law unto themselves, so don't even bother unless you speak French and have family there.
Healthcare - I *think* you are eligible as long as you pay in. If you have the right to pay in (even if/after you leave), do it. If is far more affordable than US private insurance. You can argue about the quality, but 95% of the time, an appendectomy is an appendectomy. Its all fairly routine.
rob cunningham
RE: Americans working in Canada 1/12/2009 7:25AM - in reply to Off the Grid Reply | Return to Index | Report Post
as long as you are working, you will have public health insurance- everyone pays in. you will probably have to get 3 months private when you first arrive as you have to be in country for 3 months for it start up. that may vary from province to province...

as for 'quality', you make it sound like everyone in a hospital is a 3rd world witch doctor.