Job Move -US to Canada what financial considerations ?

[GLM]

Hoping others on this board with international living / working experence can enlighten me. DH was asked today to "consider" a position in Canada (We would move there) Financial Bonus potental could possibly move up ER.

Mega corp has moved us in the US several times so we are familar with the usual relocation considerations but are unfamilar with the financial implications to consider here . (Taxes Insurance ....)

Before we let megacorp take this further we are frantically trying to research what this means . Any input from this board woule be greatly appreceated !

 

[Meadbh]

Here are some websites that may interest you:

Welcome to Citizenship and Immigration Canada

Canada - Wikipedia, the free encyclopedia

Canada Revenue Agency -- Main menu

Bank of Canada - Banque du Canada

Walter Harder & Associates Home Page

Google "government of [province or territory of your choice]"

Your question is rather global. Some facts: Canada is a federal system in which provinces (10) and territories (3) manage health and education. Defence, monetary policy and foreign affairs are managed by the federal government. Currently, the economy is in a strong positive trade balance. The US is Canada's largest trading partner. The richest province by far is Alberta. Cost of living varies accordingly. Housing markets are hot in Alberta and BC particularly. Canada has a tax treaty with the US. Presumably you would be required to file a US tax return while living here, as well as a Canadian one, but there would be reciprocal credit. From personal experience I recommend getting an accountant to help with your tax returns, at least in year 1. The Walter Harder site allows you to calculate federal and provincial taxes in Canada. Income taxes are higher in Canada than in the US but we have universal healthcare; while much maligned, it is considerably cheaper than in the US. As far as investments go, capital gains are currently taxed based on a 50% basis, i.e. you pay your marginal tax rate on 50% of your capital gains. Dividends are the next most efficiently taxed (complicated formula) and interest is considered income. Mortgage interest on your principal residence is not tax deductible but capital gains on its sale attract no tax liability. Rental income is taxed as income. Canadian dollar is currently at over 94 cents US (comjpared to 65 cents a decade ago).

Culturally Canada varies from coast to coast at least as much as the US and the term "unique society" can be used to describe anywhere from Newfoundland to Quebec to Nunavut to B.C. Generally a bit more laid back than the US and (perish the thought) more liberal. Less of a melting pot, more of a smorgasborod.

Did I mention it gets a little chilly? Expect high heating bills, unless you live in rare pockets of temperate climate.

Speaking as an immigrant, bottom line: Canada is a great place to live! Would be glad to try to answer any more specific questions.

 

[Ed_The_Gypsy]

You are probably looking at moving from one big US city to one big Canadian city (WAG).

I am guessing that your cost of living will be higher in Canada, as will your income taxes. You won't find the shopping as good as in the US, either.

Note that income inside a US Roth IRA is taxable in Canada.

Also note that interest paid on a home loan is not deductible in Canada.

There are no joint returns in Canada. This is called income-splitting up here.

You will first file and pay taxes in Canada, then file in the US. There is an exemption for having paid taxes in Canada.

You should have a cross-border accountant do both Canadian and US taxes. Expect to pay on the order of $500 for each return. There is no home software that will do your particular returns.

Yeah, it gets cold up here. This past winter there were many days here in Calgary below -30 F and it can get down to -40 F, too. I kinda like it.

 

[AltaRed]

Ed, I think the OP also needs some info on how US citizens should handle their investments in the USA while they are resdents in Canada. I don't know the answers because I only know the answers in inverse... i.e. Canadian citizens becoming residents of the USA.

Presumably the OP would have US withholding tax applied on US domiciled investment income while out of the country (in accordance with the US-Can tax treaty, i.e. 15% on dividends and 0-10% depending on type of interest income on US domiciled investments). If so, that would commence when the OP changes postal address with brokerage accounts and presumably the OP would have to provide W-8BENs to the brokers, banks, etc. If there is a withholding tax, it would still be a foreign tax credit on their Canadian tax returns so that there is not double taxation.

Also how does Canada treat "paper" capital gains earned on investments while in Canada for US citizens? For Canadians returning to Canada, Canadians are deemed to have 'purchased' all investments at fair market value based on date of entry. That is all good and fine. But when the OP should return to the USA, is there not a corresponding 'deemed' disposition and therefore Cap Gains imposed on all gains on investments while residing in Canada? In any event, the OP should talk with a good Canadian cross border tax accountant to see if there is a CG impact on their existing investments.

 

[bosco]

read this:

Financial Webring Forum :: View topic - If You're a Snowback Returning from the U.S.

the one further down, about US to Canada, not the first post.

It really depends on the conditions of your employment. I could be wrong, but if you are still attached to a US office and paid in US dollars, it might be a different situation. You might avoid a lot of this if you are considered to just be a Yank stationed non-permanently on Canadian soil. The way to know for sure is if you end up having to obtain a permanent resident card. If so, then look into the financial and tax angles carefully.

If you are actually immigrating to Canada, then the trick is to position all your money BEFORE you assume Canadian residency. You do this for two main reasons:

1) it is virtually impossible to open new bank accounts or credit cards in the US if you do not live there, but many places will continue to maintain existing accounts and even mail statements to Canada (Fido and Wells Fargo both will, for example)

2) Events which are non-taxable in the US are taxable in Canada. Therefore you need to be sure the event takes place prior to Canadian residency. Example: rolling a 457 plan into an IRA. In Canada, this could be taxable since 457s have no exact counterpart in Canada.

So be sure to hang onto at least on US credit card and a bank account.

Talk to a cross-border accountant BEFORE making the move (like DW didn't...).

Also, the cross-border rules change from year to year. And the first full calendar year may be treated differently than subsequent years. It's complicated.

Hope this helps.

 

[GLM]

Awesome! If my question seemed vague it is because I know I don't know what I don't know!

I have distant relatives in Canada. (parents' cousins & my own) and was raised in Michigan - on the Canadian boarder. I have watched the steady decline of the US dollar to the Loonie since I was a child. In fact we were there less than 2 weeks ago. I can research real estate values and cost of living rather easily (Love the internet for that these days!) Yes I know it's cold. Not my cup of Tea - DH would just have to live with the heating bills.

I am assuming if MegaCorp wants us to go they will deal with the whole work permit or Immigration issues for DH. I am not employed beyond concierge tasks, cook, housekeeper and household CFO.

Meadbeth

Thanks for the links - the last on tax estimating is a gem. I was thinking only on income tax issues - how short sighted. Wow, we need to look at the impact on investment income in a big way. The Roth tax is a good example of what we need to consider. Even filing separately could have a major impact on our tax liability.

I was wondering how health benefits would be treated for us in Canada. We would not plan on remaining in Canada. Retirement is currently planned in seven years - we were hoping the move would move FIRE closer. I would guess that we would stay in Canada 2-5 years.

Ed_The_Gypsy

Yes - Big US city to Big Ca. City. Found a site that calculates that cost of living almost 50% higher. (Ouch) Salary negotiations could get interesting .

As a LBYM with kids grown, not much of a shopper. (I grew up seeing the Canadians cross the boarder to shop. I also have window shopped while in Canada - not impressive . Home is paid off.

"Income Splitting ? " Does this mean as a non working spouse we file seperately and split DH income between us ? I need to look into this .Paying a tax preparer would be a new expense for us. I can see how it would be a necessary expense - thank you for the estimate.

AltaRed

Mind melting considerations. As if our taxes and a regular move are not complicated enough ! Good questions and points I need to consider .

bosco

More excellent points - It underscores the need to research everything with time to reposition assets before any move .

Thanks again everyone - the issues give us pause. DH is close enough to FIRE that job aspirations are waning . This will help up see if MegaCorp is serious enough to make us an offer that will be further our goals , not just that of MegaCorp . (Not that I am skeptical )

 

[kcowan]

I would think it is fair to ask Megacorp to treat any adverse tax implications as an expense item for them. Also they should underwrite all accountant fees. It is in their best interest.

You need to understand the financial benefits of purchasing a home and getting a potential capital gain or loss when you return. Also how are your home gains upon sale in the US protected?

 

[bosco]

Awesome! I
"Income Splitting ? " Does this mean as a non working spouse we file seperately and split DH income between us ? I need to look into this .

you and you hub will file separate tax returns. Your taxes are figured separately. There are some exceptions, but they are mostly for people already retired. You will most likely not be able to split your husband's income--he will have to pay taxes on it himself. Canada's tax structure is presently not kind to single-income couples. There is talk about changing this, but it hasn't happened yet AFAIK.

so you will have a minimum of 3 tax returns--2 in Canada and one in the US. And they need to be coordinated. This is why a cross-border accountant is almost a necessity, at least at first.

I was wondering how health benefits would be treated for us in Canada. We would not plan on remaining in Canada.

if you are legally admitted to Canada, and not a visitor, you will normally be required to obtain Canadian coverage. In BC, the maximum it costs is $56 per month (or something just under $100 for a couple). Possibly less depending on income. Don't know the rates in other provinces but probably not much different.

Often employers will offer extended benefits--dental, vision, prescription drugs, and enhanced medical.

 

[Meadbh]

If you are legally admitted to Canada, and not a visitor, you will normally be required to obtain Canadian coverage. In BC, the maximum it costs is $56 per month (or something just under $100 for a couple). Possibly less depending on income. Don't know the rates in other provinces but probably not much different.

Often employers will offer extended benefits--dental, vision, prescription drugs, and enhanced medical.

In many provinces, health care coverage costs $0 per month.

 

[2B]

Yeah, it gets cold up here. This past winter there were many days here in Calgary below -30 F and it can get down to -40 F, too. I kinda like it.

I'm glad you gave the temperatures in F. -40 C would just seem so much colder.