US citizen working in US but living in Canada

[DrugDoc]

I want to move to either Toronto or Vancouver. I have a job that I travel around the US. I eventually would like to become a Canadian citizen. Does anyone know the tax implications of me living in Canada, being a US citizen and still earning a living from US sources?
Information would be greatly appreciated.

[Reba]

Thru what avenues do you intend to immigrate to Canada? Are you married to a Canadian? Is one of your parents Canadian? The how is just as important as the what next. In fact, you can't have the what next, until you've completed the how.

[DrugDoc]

I am planning on immigrating with a professional degree and hear it was fairly easy to do so if you you hold a doctorate. I will plan on obtaining my license in Canada, but, since I have been out of school for some time this might take a great deal of freshening up on a lot of basics that we never use but are generally on medical board exams. I want to live in Canada, still work in a traveling job in the US, and study until taking the boards in Canada.
Anyway, thanks for the email back. I'm originally from NC. I see you live there. How do you like it?

[Steven]

It is fairly straightforward to qualify as a skilled worker if you have a doctorate, but because the idiots at the CIC dropped the points required in 2003 so low that almost anyone with a BA could qualify, you will be in for a wait for a couple of years before your visa gets approved.

From a tax standpoint as a US citizen you have to file a 1040 every year until you die, although once you are non-resident you do not have to pay US taxes except on US-source income, and if you reside in Canada there's usually a way of claiming a foreign tax credit for it.

The big snag is that in 2006 the US capped the foreign tax credit for non-residents, in 2007 it was $87,500, so essentially if you earned more than that, you would be subject to dual taxation (although this may not be a problem if your income is mainly US-source). There are other deductions you can claim and the limit will have obviously gone up a fair bit by the time you immigrate, but life will get complicated for you if you earn over $100,000 a year I suspect.

From a tax standpoint it also gets complicated if you work in both countries. The 2008 tax treaty requires tax to be paid proportionally to both countries based on where the work was performed. This isn't terribly difficult if you have two employers (or one employer who has a business in each country) but if you're self-employed it's a bit of a nightmare from a tax standpoint because you have to do payroll withholding in two countries.

If you do all the work physically in the US and you simply live in Canada, you will pay US rates, then claim a foreign tax credit in Canada, then pay any difference on top of that (which there almost certainly will be), so you effectively pay the rate in the Province where you live. BC has the lowest marginal rates in Canada at the lower rates of income, over about $75,000 though you're better off in Alberta as we have a flat tax at the Provincial level.

Alberta is generally the best place to live from a tax standpoint in Canada as natural gas is subsidised, there is no healthcare premium from 2009 onwards and we have no PST.

Supposedly we have the best healthcare in Canada as well, which if it's true makes me wonder how people who live elsewhere in Canada survive.

Bear in mind if you're an MD then the healthcare system in Canada is nationalized, coverage varies at the Provincial level but there is a minimum standard all Provinces have to meet. If you fall into one of those occupations you have to work for the Provincial healthcare system, essentially. Dentistry, optometry, cosmetic surgery and so on are usually not covered except in rare situations (e.g. you're a burn victim).

There are also extra immigration requirements for MDs, assuming you want to practice in Canada, however there is a huge move on at the moment to certify foreign MDs ASAP due to the shortage of GPs. I wouldn't have thought coming from the US it would be terribly hard.

[Reba]

I also think that if you intend to immigrate based on the medical degree you have to intend also to work in Canada. I don' think they'd approve it if you don't intend to work there. Its kind of the point of the points/skills system.

Yes, I live in Morganton, NC, we're an hour from Asheville and an hour and a half from Charlotte, in the foothills. I don't much like it. More to do with this town specifically than the state really.

[Steven]

Not necessarily. What they want you to do is pay taxes in Canada, where you work is not that important (except as regards maintaining LPR status). If you're a Canadian LPR you have to pay taxes in Canada. I'm sure they would prefer you to work in Canada and as an MD that's usually a job for a nationalised industry, but I know an MD here who has TN-1 and has patients in the US.

[maryjo]

I am a US citizen and PR of Canada i would like to live in Toronto to take care of my grandmother who is ill my mother lives in Toronto as well i come to Toronto when ever i am off i am a pilot can i live in Toronto and work in the US.i have been a PR of Canada for more than 10 yrs just never lived in Toronto, but always came to visit my grandparents every holiday for the pass 10 some yrs i was born in the US my grandfather passed away 3yrs ago and my grandmother is a alone so i am know taking care of her my question is can i live in Toronto with my grandmother and mother and work in the US what do i need to do.

[agnelson]

You can live wherever you want. If you live in canada, you will report your income in US and canada. You will then take various foreign tax credits to reduce your overall tax to -- in essence -- canada and ontario tax rate.

Its the logistics of living in one city while being based in another that might prove more difficult.


Tax questions like this are best dealt with at a tax forum like forums.serbinski.com