Did I do these trial sample Canadian tax returns correctly?

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JimGnitecki
Posts: 5
Joined: Sun Jan 31, 2016 6:24 pm

Did I do these trial sample Canadian tax returns correctly?

Post by JimGnitecki »

My wife and were born and raided in Canada and emigrated to the U.S. decades ago, but have of course retained both Canadian and U.S. citizenship.

We are strongly considering returning to Canada, and income taxes are one of the remaining "sanity check tests" to perform.

So, I pretended I had moved back to Canada during 2014 (last year I could find Canadian tax returns for when I did this weeks ago), and assumed we had been in Canada for the entire 2014 year.

I assumed for ease of calculation that only I had any income and that that income consisted of:
- my U.S. Social Security benefit of $2163/mo = $25,956/yr U.S. = $25,956*1.25 = $32,445 Canadian, plus
- my Canada Pension Plan benefit estimated to be only $240/mo = $2880/yr CDN
for a total of $35,325 CDN/yr

I took off 15% of the U.S. Social Security (only) which is non-taxable under terms of the U.S. Canadian tax treaty.

I gave myself the following tax credits:

- Myself
- My wife (because she has no income in this scenario)
- The old age tax credit for my age

I did what I thought was the proper math using the Federal 5010, Schedule 1, and Worksheet, and came up with only $179.71 owing to the Federal Govt.

I repeated this using the proper process for British Columbia, which is our likely destination, and came up with $408.37 owing to BC.

So, a total of $580.15.

Then, since Canada does NOT have "joint returns like in the U.S., I pretended my wife had her own Social Security benefit of $1225/mo = $14,700/ yr U.S. = $14,700 x 1.25 = $18,375/yr CDN. I applied her own personal credit, her age credit, and the 15% tax treaty benefit to her return, just like I did for mine.


I calculated my wife's taxes at the $18,375 CDN to be zero for both Federal and BC due to her credits more than offsetting the tax on the after-treaty taxable income.

But, her income made it impossible for me to take her as a spousal credit on my return, and pumped my Canadian taxes to Federal $1871 + BC $836 = $2707 total.

So, for a combined household income of $35,325 + $18,375 = $53,700 CDN, reduced by 15% tax treaty provision to $45,645 CDN, does $2707 for the total of Federal plus BC taxes seem to be in the right ballpark?

I did not apply the Canadian pension credit in any of the 3 returns as I didn't know if U.S. Social Security qualifies for a pension credit under Canadian tax law.

Did I do this correctly or am I way off base?

Jim G
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

You need to redo these based on your other posts. You had a wrong assumption in each of your questions.

In the end you will only pay a little US tax on your 401(K), and the rest will be taxed in canada
Assume you will be paying more tax in Canada. Period. Is it worth the free medical care?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
JimGnitecki
Posts: 5
Joined: Sun Jan 31, 2016 6:24 pm

Post by JimGnitecki »

[quote="nelsona"]You need to redo these based on your other posts. You had a wrong assumption in each of your questions.

In the end you will only pay a little US tax on your 401(K), and the rest will be taxed in canada
Assume you will be paying more tax in Canada. Period. Is it worth the free medical care?[/quote]

On the 15% tax treaty credit: I think I just expressed incorrectly the 15% tax treaty credit. I did show my FULL U.S. Social Security income, but then took the 15% treaty credit on Line 256 of the Canadian return.

And yes, the free medical is a HUGE benefit. U.S. medical insurance rates are increasing very rapidly, and the co-pays are getting big enough to be budget killers, especially for retirees. American financial columnist Scott Burns has put together data that seems to say we cna expect to pay about $10,000 per year for medical care for age 65 to death age retirees. The Canadian taxes seem like a bargain in comparison, plus you have a predictable, versus a highly variable budget.

In The P{rovince of British Coklumbia, the emdical care is sticty speaking not free. It costs about $70 Canadian per person - still a world class bargain considering that the income taxes that pay for the rest of the true medical costs in Canada are pretty low for retirees.

Thank-you for your quick replies, but one more question:

IS US Social Security considered a "pension" under Canadian tax law, and therefore can you take the pension credit, which in my case would amount to $2000? I realize that the $2000 credit is non-refundable if I don't need all of the $2000 to wipe out my Canadian taxes.

Jim G
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Like I said, you made so many wrong assumptions in your other post (why 2 posts?) that I didn't bother reading the mechanics of of this one.

Bottom line: you will pay tax on all your income as if you earned it in BC, no more, no less.

SS is eligible for the pension amount.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
JimGnitecki
Posts: 5
Joined: Sun Jan 31, 2016 6:24 pm

Post by JimGnitecki »

[quote="nelsona"]Like I said, you made so many wrong assumptions in your other post (why 2 posts?) that I didn't bother reading the mechanics of of this one.

Bottom line: you will pay tax on all your income as if you earned it in BC, no more, no less.

SS is eligible for the pension amount.[/quote]

Thank-you!

Jim G
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