364 days

I have been asked to do a foreign assignment in the US (as a Canadian resident, employed by a Canadian company) and the term is 364 days. The HR told me that working in the US for less than one year (365 days - 1 day) would give me tax benefits. Has anyone heard about this rule? Thank you.

I think they're talking about being exempt from provincial income tax for a year and you claim closer association to Canada (so you're not subject to US tax). You still have to pay Federal tax on your income that you earn while in the US though.

Thanks Steven!

Bear in mind to do it is not easy, you have to sever all ties to the Province. No DL, no healthcare, no car registration, etc., nothing official from that Province. It's generally not worth the hassle just for a year, and if you're going for a long time, you may as well simply become completely non-resident for Canadian tax purposes and pay US income tax instead.

The problem with becoming non-resident for Federal tax purposes is that you can then get hit with the Canadian capital gains tax on your Canadian assets, so if you are in a non-immigrant category in the US (e.g. TN-1, F-1, etc.) and you are thinking of coming back eventually, you can carry on paying Federal Canadian taxes via filing IRS Form 8840 and claiming the tax treaty exemption from paying US income taxes.

Then you become a resident of the State where you reside and pay the State income taxes (if any, FL, WA, TX, NH, SD don't have any). But you're still better off paying State income taxes in the US and paying Canadian federal taxes as State taxes are lower than any Canadian province.

Although you have to pay for your own healthcare costs, which is the primary reason why very few people bother becoming non-resident for provincial reasons but still paying Canadian federal tax. It just isn't that big of an advantage when you work out your living costs, although you don't have to go back to Canada to see the doctor.

Also it makes your tax returns (you still have to file a US one even if you claim the exemption, you just don't pay any tax to them) an utter nightmare.

Thanks again Steven. No I am not planning to become a NR because I am gonna come back after 1 year or maybe sooner if things don't work out. The good thing is, they are paying for the accountants fees. I don't really care for the provincial health care. My family doctor doesn't let me do anything anyway. I like the US med system much better. as long as I have private insurance coverage.