Working in US, better to keep Canadian residency?

Hey Guys!

I was wondering if people have any insight into the advantages/disadvantages of working in the US and keeping/losing Canadian residency?

My husband and I are currently working in the US on TN visas and we have kept our Canadian residency so he can take advantage of some Foriegn Employment tax credit (I'm not eligible for it but he is). However, he has now been offered a full-time job here and I am being laid off. If he takes the job here, then we would switch to L1/L2 visas, and I'm not sure what we should do about Canadian residency. We plan to return to Canada eventually, maybe within 3 years or so.

What are the requirements for US/Canadian residency? Can we be a resident of both at the same time? Is there a tax advantage/disadvantage? Any other considerations?

Thanks,
Sharon

-- Sun Feb 07, 2010 3:45 pm --

Income taxes in Canada are LESS than the US!

What a surprise!

My husband and I are from Vancouver BC but we have been working in Boulder CO on TN Visas with a Per Diem housing allowance. A tax consultant told us that it would be better to remain a resident of Canada for tax purposes during this time to take advantage of a foreign tax credit (only his job qualified, mine didn't) and/or something that makes our Per Diem tax-free. My husband has now been offered a full-time job in Colorado (no more per diem or housing allowance) so I have ran the income tax numbers to see how much less tax we'd pay in the US. Turns out my simple calculations show that we would pay more tax in the US! What a surprise! My calculations show that Canadians pay about ~3% less income tax... My example is very simple as it has no tax deductions, tax credits, capital gains, dividends, children, nor real estate (that pretty much describes us anyway). Is my example too simplified? Do the more extensive tax deductions in the US make up the difference? Why does everyone think income taxes in the US are so much less than in Canada?

Not sure how the formatting will come out, but here's my analysis below...

Canada and US Income Tax Comparison
Simple comparison using no tax deductions, tax credits, capital gains, dividends, children, nor real estate

2009 Canadian Income Taxes (including BC provincial tax)
Status Single Single Single x 2
Income 100,000 75,000 150,000=75,000x2
Canadian Federal 17,759 11,517 23,034
British Columbia 7,270 4,313 8,626
CPP 2,119 2,119 4,238
EI 732 732 1,464
Canadian Total 27,880 18,681 37,362
Canadian Avg % 27.9% 24.9% 24.9%

2009 US Income Taxes (including Colorado state tax)
Status Single Married Married
Income 100,000 100,000 150,000
Colorado Rate 4.63% 4.63% 4.63%
Social Security Rate 6.20% 6.20% 6.20% Up to 106,800 of income
Medicare Rate 1.45% 1.45% 1.45%
US Federal 19,102 12,700 25,200
Colorado 4,630 4,630 6,945
Social Security 6,200 6,200 6,622
Medicare 1,450 1,450 2,175
US Total 31,382 24,980 40,942
US Avg % 31.4% 25.0% 27.3%

Canada vs US Comparison
Compare percentages so no exchange rate needed

Status Single Married
Income 100,000 150,000
Canadian Avg % 27.9% 24.9%
US Avg % 31.4% 27.3%
Difference -3.5% -2.4%
Approx $ -3,502 -3,580

Notes
Canadian income taxes are LESS!
US FICA taxes are ~8K while Canadian CPP+EI are only ~3K
US allows more tax deductions than Canada including: mortgage interest, property taxes, health spending account, tax preparation costs, etc.
Deducting mortgage interest and property taxes in the US may be enough to tip the balance?
However, deducting those may cause forfeit of the basic personal deduction (~7K) so maybe not a huge difference?