Married, but living in two countries. Crazy?

Hello! I saw there were several similar posts, but none that really answered my questions.

I have dual (US/Canada) citizenship, and my boyfriend is a US citizen. After going back and forth for several years on where to live, we've decided to try both countries. I am going to move back to Canada to be closer to my family in 2009, and he would stay in the US and retain residency.

We aren't married yet, but plan to in the future and have a family (once I am fully reinstated back in Canada). This is where is gets tricky. Say in the future we have children, if I stay in Canada with them, can he come and go to Canada as he pleases (as a visitor)? I thought he'd be OK so long as he wasn't gone from the US for more than 6 months or something like that. (Just to add, we both travel for work, so the distance is a constant regardless of where we live.)

The reason we'd keep the arrangement as so is that he has a child in the US. For custody reasons it would not work for him to move to Canada until she is 18 or at least older than she is now. (She's nine.) Also, maternity benefits are much better in Canada and I'd prefer to raise my kids there.

I guess my questions are; 1) is it reasonable/legal for a married couple to live independently in 2 countries; 2) is this ridiculous to do with kids (from a legal/custody standpoint); and 3) any tips or tricks to make this easier?

Sorry for the novel and thanks for any tips. I got great advice from this board 8 months back.

I can't see why you couldn't do it that way, at least from an immigration standpoint. The children would presumably be born in Canada and you're a Canadian living in Canada. If he retains residential ties to the US and has proof of it, I can't see why they wouldn't let him in on extended visits. Even they won't, he can get PR status if you sponsor him for it and he can't lose it while he's married to you and spends significant amounts of time with you.

Where it's going to get messy is with the taxes. As a US citizen you have to file a 1040 every year (regardless of where you live), and so does he, and if you're married you have to file jointly. However as someone resident in Canada you have to file a T1 also. He has residential ties to Canada because his wife and children live there. Therefore it's not entirely clear where your tax home actually is, it has to be the same country because you're married but you live in different countries so it's not clear which one it is.

It would depend to a very large extent on how much time was spent in either country. If he does get PR status in Canada, then it would be Canada, even if he works in the US. A claim of permanent residency is exactly that under the tax treaty.

This effectively means that he has to pay Canadian taxes which will probably be higher, because he will have to file jointly on T1 in Canada, declare his income and claim a foreign tax credit for the tax paid in the US, and then pay on top of that the difference between US and Canadian taxes.

So from a cost standpoint you're definitely better off financially living in the US, at least as far as taxes go.

Frankly you really need an accountant in Canada who is very familiar with caselaw under the tax treaty to work this one out as it's quite a messy situation tax-wise to be in.

...as I thought it might be.

Thank you for your advice, it's much appreciated. I think we need to find a good accountant (or two) to see if this is worth it financially.

If we do plan to have kids, I think for those few years it might be worth it fiscally. 52 weeks paid leave, vs. 8 weeks that I'd get in the US is mighty appealing.

It might even be better not to get married, and just remain autonomous for tax reasons. That is something else I think I might explore.

Thanks again Steven.

When my husband and I were living in separate countries, all we did for taxes was that he filed as married in the US (have to by IRS law, as far as they're concerned married is married no matter where you're all living), but did not have to pay income taxes on my Canadian income. We declared it, that's it.

In Canada I filed my taxes as married but separate, because technically, that's what we were at the time. Married, but not living together, so separate.

I think it really only gets complicated if your husband were to have LPR status in Canada. If he does not, and only ever comes for short visits, his residence for tax purposes is still the US and yours is Canada. You're dual already anyhow, and so are required by IRS law to file a tax return in the US regardless of where you live.

I'd still suggest you speak with a knowledgeable tax accountant, but that's how we did it for 3 years. I've seen this firm http://www.serbinski.com/ mentioned a few times by other Can/Am couples, I've never used them myself. There's a forum there I think too, so you could ask a few questions and figure out what to do.

Thanks Reba! That makes me feel better. We hadn't planned on him getting any status until much later. Unless of course he could find a position in Canada with his company.

On the US tax side, you said you just declared it? Is this other than filing jointly or married filing singly? I was concerned we'd be double taxed on my income since together we'd be over the 80k limit (or whatever it is). That is probably a question for the tax accountant tho...

Thanks again.

You still have to file as married filing jointly in the US, but they cannot tax your Canadian income unless you make over 85,700 I think it is this year. But that's just *your* income I think, not your combined income.

There's a different form you have to use to file as a non-resident spouse, I can't remember what it is, but certainly someone at the Serbinsky forums would.

If he does not, and only ever comes for short visits, his residence for tax purposes is still the US and yours is Canada.

It's not legal to do this, basic tenant of income tax law. If you're married you have to file in the same country. Doesn't matter what the physical separation is.

Otherwise rich people would just move their spouses to Monaco and put everything in their name.

A spouse is a residential tie to that country, so you have to choose which country both of you are going to reside in for tax purposes.

You might be able to fudge it for a short period if you're in the process of actually moving there because you are allowed a short period to move your tax home, but you can't do it ad infinitum.

Like I said above, you really need a good cross-border accountant who is familiar with the caselaw under the tax treaty because in this situation the physical documentation you have doesn't prove it one way or the other. The only thing that would is if he had LPR status in Canada, then the tax home would definitely be Canada.

But, he would only have LPR status in Canada if he lived in Canada, and the whole thing here is that they want to live in separate countries.

He wouldn't be able to keep his LPR if he moved back to the US, it would be abandoned, as he wouldn't be living with his wife.

Yeah, but that's an immigration issue, we're talking about taxes. Under US and Canadian law if you're married you have to file jointly, the CRA and the IRS don't give a damn what your immigration status is, you could be in the country illegally for all they care. In addition a spouse is a "residential tie" to that country. If he hasn't claimed permanent residence in Canada then they can choose either the US or Canada, but if he does get LPR status in Canada then it will definitely be Canada because a claim of permanent residence is exactly that. Whether it's abandoned or not later on is not really that important, the calculation of where your tax home is in this situation is somewhat murky, so the fact that he wants to permanently reside in Canada whether he meets the letter of the immigration law or not is what counts - and he showed that by getting LPR status to begin with.

Without him ever having LPR status it gets more murky, depends on the amount of time he spends in either country, how long she spends in either country, etc. There is a formula for calculating it in the tax treaty but also you need to check the case law on it.

Certainly if they choose the US, the CRA aren't going to be happy about a Canadian resident family filing as non-resident ad infinitum, which is why she needs a lawyer really because when they ask her to fill in NR-73 she needs something to back it up.

To be honest the simplest way out of it is to not be married, or live in the same country!

While I'm thinking about it, you can only have one principal residence if you're married as well, so you'd have to figure that out. One would be subject to capital gains tax if you had two. Which is another reason why you can only have one tax home.