FIRE to Canada

[maddythebeagle]

Red_y actually brought this topic in another thread and I was wondering if this is something others are considering. How hard is this to do? Is it really worth it? What are the tax implications?

 

[azanon]

What's with you guys wanting to leave the awesome U.S. of A? Oh man, i think we were so lucky to be born here.

 

[Calgary_Girl]

What's with you guys wanting to leave the awesome U.S. of A?    Oh man, i think we were so lucky to be born here.

No offense, but I think I was lucky to be born in Canada.

 

[brewer12345]

I think its pretty hard to do, at least legally.  You'd have to watch out for the specifics of immigration laws and probably have to be out of the country for part of the year, although I don't know the specifics.  Regardless of where you live, the US will still tax you.

 

[Calgary_Girl]

Red_y actually brought this topic in another thread and I was wondering if this is something others are considering. How hard is this to do? Is it really worth it? What are the tax implications?

Here's the link to the Government of Canada website for immigration info: http://canadainternational.gc.ca/gtc/Going_To_Canada-en.aspx

Basically, one simply can't retire to Canada if one feels like it. Canada has a point system and it's much easier to immigrate here if you are young and educated.

 

[azanon]

No offense, but I think I was lucky to be born in Canada.

Oh I agree, that's plenty lucky given all the other possible options!

No offense intended in my reply, of course.

 

[Spanky]

Basically, one simply can't retire to Canada if one feels like it. Canada has a point system and it's much easier to immigrate here if you are young and educated.

In other words, they do not want old and uneducated.

Not that many years ago, the only requirement was that if you have an asset of $200K or more, you are automatcally qualified. That was the ticket for many people to immigrate from Hong Kong to Canada in the late 90s.

 

[Calgary_Girl]

In other words, they do not want old and uneducated.

Not that many years ago, the only requirement was that if you have an asset of $200K or more, you are automatcally qualified. That was the ticket for many people to immigrate from Hong Kong to Canada in the late 90s.

You are right, you "score" higher if you are bringing assets with you (i.e. cash) and you also score higher if you were a business owner in your previous country and plan on starting a business in Canada.

 

[Calgary_Girl]

Here's the point classification system used to determine if you qualify as a "skilled worker":

http://www.cic.gc.ca/english/skilled/qual-5.html

Of course, you can also immigrate if you have relatives here who are willing to sponsor you.

My husband (an American) was able to immigrate here because he obtained a job transfer from the States. The drawback is that you must work for the same employer. DH is now a Permanent Resident though (meaning he can work for anyone and is the first step in applying for Citizenship) because I sponsored him since I am a Canadian citizen.

 

[Red_y]

I was writing this up on the other thread while y'all started this one, so I'll repost my reply here about why I'm going to Canada and how hard it is to get there.

It's doable but takes some planning. Regarding the point system, you have to remember that the Canadians can raise or lower the "pass mark" at will. After 9/11, they raised it considerably and I didn't have enough points. In Sept. 2003 they lowered it to where I qualify. So if you're thinking of taking this route, get in while the gettin's good.

My story:
I am (1) disillusioned with the direction the US is taking on a number of levels (2) queer as a 3-dollar bill (3) an outdoors nut (4) liberal and pacifist in the extreme.

In Canada, I can live in one of the best countries in the world (with its national health system, livable climate, educated and tolerant population, budget and trade surpluses), speak English, drive on the right side of the road, feel somewhat less of a target for violent extremists, and legally marry my SO.

It is possible to immigrate in the Skilled Worker category as I am if you meet their point system requirements. Points are given for education, speaking fluent English or French, work experience, age, etc. My useless English degree finally paid off! There are other immigration categories if you have relatives in Canada or marry a Canadian.

Sadly, they eliminated the Retirement category some time ago. That's why it was important for me to apply before I was 50...you start to lose points then in the Skilled Worker scheme.

It took me about 2 years total to get through the immigration process...making the decision to go, collecting all the required documentation, submitting the application, undergoing medical check, getting FBI fingerprint check, etc. For the two of us, it cost about $3500 total in fees, medical tests, photos, fingerprint check, express mail, etc.

All Canadian citizens and Permanent Residents are eligible to be covered by the provincial health care system of the province they reside in. I'll have a 3-month waiting period when I move to BC, but that's it. Dental and vision coverage are not included; from what I've read on the newsgroups, most Canadians self-insure for those.

And I will be paying into the system after I move to British Columbia via the GST (Goods and Services Tax) and PST (Provincial Sales Tax). These add about 15% to just about every purchase you make of goods and services. That's where funding for their health care system comes from.

 

[wabmester]

It looks like you lose your US citizenship if you become a Canadian citizen by applying for Canadian citizenship (vs acquiring Canadian citizenship automatically). What sort of hoops to do you have to jump through if you decide to repatriate to the US?

 

[Calgary_Girl]

It looks like you lose your US citizenship if you become a Canadian citizen by applying for Canadian citizenship (vs acquiring Canadian citizenship automatically).   What sort of hoops to do you have to jump through if you decide to repatriate to the US?

Nope. Our immigration lawyer told us that my husband can have dual citizenship. Plus, DH already knows that we won't be going back to the U.S. except maybe for a few months in the winters to be snowbirds

 

[Red_y]

Actually, citizenship in Canada comes later. I'll have to be a Permanent Resident of Canada for 3 years before I can even apply for citizenship. Then that starts another round of application, tests, fees, waiting...

And I do not lose my US citizenship by either becoming a PR or a Canadian citizen. Dual citizenship is not a problem to the Canadians.

Renouncing US citizenship is pretty harsh and doesn't relieve you of the requirment to file a US tax return. In fact, the IRS just assumes you are renouncing to avoid taxation and makes you file for an additional 10 years anyway. Not worth it, IMHO, just to make a point or as a "protest". US citizenship is a pretty valuable thing.

 

[maddythebeagle]

Does anybody have a good factsheet on the tax system in Canada. So it sounds like you still have to pay us income and investment taxes? plus that extra sales tax that you talked about for the health care system.

 

[wabmester]

Gotcha.  I misread the following from another site:

a person who acquires a foreign citizenship by applying for it may lose U.S. citizenship

But the may apparently means only if you insist on it, not that the US will revoke your citizenship.

http://www.amcits.com/dual.asp

 

[jerryo]

I think that you can also still get immigrant status in Canada under an "entrepreneur" category, if you deposit $400,000 (Canadian) with the provincial government for 3 years (or so) interest free.....

You also can get in under a "business" category if you have the experience and wherewithal to start a business.

 

[Red_y]

I'll dig up some tax info I have at home and post later.

The net/net is that the Canadian exemptions, rates and brackets are pretty similar to the US, except that the highest rate tops out at 46%. As a frugal retiree, I'll be nowhere near the top bracket.

No joint returns; married couples file individual tax returns.

No deduction for home mortgage interest.

They don't recognize the Roth IRA as a retirement vehicle, so you have to pay taxes on income/cap gains in your Roth every year as if it were in a taxable account. Regular IRAs they do recognize.

There is a tax treaty between the US and Canada that prevents the same income from being taxed twice, but you do have to file dual returns ad infinitum. Canada taxes based on residency, the US taxes based on citizenship.

Giant PIA but I have access to H&R Block tax info to help me sort it all out.

 

[nfs]

Does anybody have a good factsheet on the tax system in Canada. So it sounds like you still have to pay us income and investment taxes? plus that extra sales tax that you talked about for the health care system.

Compared to the US, the upper middle class gets soaked for income tax in Canada. Marginal tax rates on employment income climb much faster than they do in the US. Tax on investment income is actually pretty comparable to the US, as long as you're careful about it.

For a moderate income FIREe with an appropriately structured portfolio, it's not a big deal. (Working stiffs with fat incomes take it in the neck on your behalf.) The example I always cite is that a married couple can collect close to $160k a year in dividends and capital gains - it has to be evenly split between them and the dividends have to be Canadian - and still pay only about 10% of it as income tax (combined federal + provincial).

There is a good marginal rate calculator here. It's really only good for marginal rates - not the tax liability in total - because of the assumptions it makes about source of income (e.g. if you plug in $30,000, it says a BC resident would pay $4786 in income tax; if that $30,000 is Canadian dividends, a BC resident would actually pay less than a grand; if it were all capital gains, s/he'd pay about $1500).

Anyone seriously thinking about this should read the digest of advice here. If your financial situation is at all complex, get professional advice before you move.

P.S. Welcome to BC when you get here, Red_y.

 

[Calgary_Girl]

Compared to the US, the upper middle class gets soaked for income tax in Canada.  Marginal tax rates on employment income climb much faster than they do in the US.  Tax on investment income is actually pretty comparable to the US, as long as you're careful about it.

I don't know if I agree with this nfs. DH is in a very high income tax bracket but his gross salary is the same as when we lived in the States. His net income however is at least the same however (if not a little bit more actually). That's why I laugh when Americans say we pay so much in taxes because I just don't see it.

 

[Red_y]

Thanks, nfs. The links you provided are ones I've got bookmarked at home!

I also check in periodically on the discussion boards at www.serbinski.com and www.grasmick.com.

They both have exhaustive discussions about US/Canada cross-border taxation issues. You have to weed through them to find the threads that are about US citizens in Canada; usually the reverse situation is the norm, since the US prevailing wages are higher in some fields, like health care.

 

[nfs]

The usual Canadian tax complainer is a fellow who makes over a hundred grand a year, has a stay-at-home wife, a bunch of kids, and a fat mortgage payment. The hundred grand puts him in the top bracket (39% where you are but as high as 50% elsewhere in the country) with no deductions for wife, kids, mortgage interest, or provincial taxes.

Even at fifty grand, your tax bill in any province is going to be at least ten grand. In the US, you start with 50, deduct 15 as personal exemptions, 10 as mortgage interest, 5 as property tax, and are left with a taxable income of about $20k. I don't have Pub 17 in front of me but you can't pay more than a couple of thou on that in the US.

To be fair, the income tax difference never gets worse than about $10k and, for most people, it's a lot less. Toss in cheaper houses, lower property taxes, never having to worry about medical insurance - even if you do have to worry about medical care - and it's close to a wash.

But, shhhh, don't tell anyone. You'll ruin it for all of us.

 

[Calgary_Girl]

But, shhhh, don't tell anyone.  You'll ruin it for all of us. 

Mum's the word! BTW, where do you live?

 

[nfs]

Where the palm trees grow.

Shhh. Don't tell anyone that either. After all, how could there be palm trees in Canada?

 

[Danny]

We're mulling living in Canada part of the year-Toronto-keeping a residence in Minnesota...anyone doing or thinking the same?...

Lots of Ontario is lower latitude than Minneapolis and more moderate weather...Winter in Toronto Summer in Minnesota

Where the palm trees grow.

Shhh. Don't tell anyone that either. After all, how could there be palm trees in Canada?

 

[REWahoo]

We're mulling living in Canada part of the year-Toronto-keeping a residence in Minnesota...Winter in Toronto Summer in Minnesota

Dan, either you are trying to redefine the term "snowbird", or you are geographically impaired..."

REW