Tax impact of relocation to Michigan from Ontario

I am planning a move to Michigan. I have an L1B. My company is putting together a relocation package. I am trying to prepare to analyze this report.

We are planning to move to Ann Arbor with my wife & 2 kids. My questions are:

what is the income tax impact on a family to move to Michigan?

How do I evaluate a Health Insurance package?

Where can I find what is tax deductible in the US? Moving expense, real estate cost, mortgage, etc.

Is there a good resource book for preparing for a relocation to the US?

Thanks in advance

1st, ann arbor is a wicked area. i was there for several years, the only problem being on u of m football home game days, you will have problems moving around (i was close to the stadium, so i felt it.).

second, your mortgage/closing costs/interest is tax deductable (assuming you have an american mortgage, if you are concerned about tax deductions for a canadian loan i have no idea).

third.health insurance. i always took the lowest out of pocket payment i could get because im young, healthy, and without family. then i broke my back and ended up with a rather large bill to cover, so its all about how much risk you are willing to accept. there are good plans, and bad ones. do you know which provider your company deals with? with blue cross/blue shield, they can be good but many companies are going with cheaper plans providing less coverage and higher out of pocket expenses.

good luck!

Go to a book store (in Canada) and pick up a book called The Border Guide. Lots of info in there for tax implications and financial stuff for ya.

Thank you both for the inputs. I will check out that book. Any other good source of info that you can recommend would be greatly appreciated.

what is the income tax impact on a family to move to Michigan?

Depends on your specific circumstances, talk to a specialist accountant, especially if you plan on living there for an extended period of time. You should save money but the key is severing all ties with Canada, which can be tricky if you're there on a work permit. If not, you can carry on simply paying your tax in Canada and claim association with Canada via Form 8840 with the IRS. But you still have to file a US tax return.

How do I evaluate a Health Insurance package?

Try Michigan Blue Cross to begin with, I'd say.

Where can I find what is tax deductible in the US? Moving expense, real estate cost, mortgage, etc.

The instructions for the 1040NR are pretty comprehensive, but once again, check with a specialist accountant who deals with cross-border issues.

Michigan state income tax is right around 4% and the sales tax is 6%. Federal taxes are 7.62% for "FICA" (that's Socialist Security and Medicare) and Income Tax is bracketed based on income level, deductions, etc.

On insurance, it depends if your employer is offering a health plan as part of your job - most do. If your employer offers multiple choices (as mine does), you need to examine issues like your age, overall health, whether you or any family members take "maintenance" medication (like blood pressure pills) etc. In general, if you are in good health and don't have any on-going conditions, opt for the less expensive plans that will have higher deductibles. If regular medication is going to be important, I would choose a plan that has good prescription coverage, unless the medication you're on can be had in "generic" form. Although most employers offer a health plan, employees typically have to pay something towards premiums. This can vary quite a bit depending on the employer, but typical premium contributions can vary anywhere from $0 up to $250 per month. But that's better than paying full price at $500-$700 per person! The good news is you'll get to choose your doctor, and won't have to wait so long for tests and treatments. More things are covered but there can be co-pays.

On deductions and taxes in general, the IRS classifies taxpayers INDEPENDENT of their immigration status. In other words, you can be classified as a U.S. "Resident" for tax purposes, even if your status is actually something else as far as USCIS is concerned. One has absolutely nothing to do with the other. Under current IRS policy, moving expenses are generally deductible (check the IRS website for specifics). Mortgage interest, property taxes, and the like associated with property you may own/purchase here in the States is also deductible.

I would say, check on the IRS website to see how you will be classified for "Tax Purposes" then compare to your tax situation in Canada. It is possible, depending on your specific situation, that you may be able to "choose" your poison - so to speak. In other words, pick the deal that results in the lowest tax bill. That is a possibility, so read the rules carefully.

Ann Arbor is a nice town - lots to do there, good restaurants, some culture, the University, etc. But it is a bit pricey. You may want to look at some of the more "suburban" areas around Ann Arbor for better real estate deals. Having said that, the Michigan real estate market is in the TOILET right now, so it's a buyers market BIG TIME! If you plan on being in the U.S. a while, you can probably pick up some really fine real estate in Ann Arbor for a good price, and, when the market inevitably picks up again in a couple of years, stand to make a nice gain on your acquisition. Ann Arbor is always a very desirable area for buyers.

Hope this helps. Cheers, and welcome!

Snowdog