Evaluating Job Offer
Moderator: Mark T Serbinski CA CPA
Evaluating Job Offer
I have the opportunity to take a job in Toronto working for a Canadian University. The salary would be approximately 220K CAD. I'm married and have 1 kid. We would relocate completely and establish residence in Canada. My wife would likely not work (if she does she would telecommute and work for a US lawfirm part-time making approx 30K a year). I'm trying to figure out roughly what my tax liability would be in Canada and then in the US. I know no one can provide me anything precise, but I just need general guidelines so I can evaluate the offer. One other thing that is important is that I make an annual contribution to my church (non profit in the US and I assume in Canada too, but I'm not sure) of approx 10% of my gross salary. Thanks in advance.
Your overall question is difficult, which is probably why nobody has answered. I'll offer a few comments but I can't provide figures.
About church donations: Churches in Canada are normally [i]registered charities[/i], similar to a 501(c)(3) in the USA. The CRA (Canadian Revenue Agency, equivalent to the IRS) is more fussy about receipts than the IRS is. Your church contributions are tax-deductible, but only if you have an o[i]fficial receipt[/i]. Churches normally issue these to donors, after year-end.
As a US citizen, you'd have to file annually with the IRS while living and working in Canada. I believe this would typically amount to a paperwork burden only, not a financial burden, because your Canadian taxes paid are deductible from your US tax liability.
The income tax burden in Canada is higher than in the US, but not so high, in my opinion, as it might appear. In Canada there's no separate break-out of social security tax, or medicare tax. It's all lumped together as income tax. Note also that your income tax includes essentially all your medical coverage and expenses. There are no medical insurance premiums to be paid and no copays, deductibles or out-of-pocket expenses, except for possibly some limited amounts on prescription drugs, if your employer doesn't provide a full prescription drug benefit. However, prescription drugs are so inexpensive in Canada that by US standards, your drug costs will be negligible unless your medical circumstances are very unusual.
Others may differ on this, but where I have noticed a difference in cost of living between the US and Canada is in sales tax and cost of consumer goods. Sales taxes are much higher in Canada (because there is both a federal GST and in most provinces, a substantial provincial sales tax) and that really adds up. Until recently, it was much easier to find a good deal on consumer goods in the US than in Canada. Everything from blue jeans to computers would have similar list prices (taking currency values into account) in Canada and the US, but you could find it at a substantial discount down here much more readily than in Canada. This may well be changing due to the current historically low value of the US dollar against other world currencies (including Canada's), however.
At your income level I daresay you'd be looking into buying a house if you took the job in Toronto. Housing prices in Toronto are quite high, I believe, and [i]mortgage interest is not tax-deductible in Canada[/i].
I hope these scattered thoughts are of some help. Good luck!
About church donations: Churches in Canada are normally [i]registered charities[/i], similar to a 501(c)(3) in the USA. The CRA (Canadian Revenue Agency, equivalent to the IRS) is more fussy about receipts than the IRS is. Your church contributions are tax-deductible, but only if you have an o[i]fficial receipt[/i]. Churches normally issue these to donors, after year-end.
As a US citizen, you'd have to file annually with the IRS while living and working in Canada. I believe this would typically amount to a paperwork burden only, not a financial burden, because your Canadian taxes paid are deductible from your US tax liability.
The income tax burden in Canada is higher than in the US, but not so high, in my opinion, as it might appear. In Canada there's no separate break-out of social security tax, or medicare tax. It's all lumped together as income tax. Note also that your income tax includes essentially all your medical coverage and expenses. There are no medical insurance premiums to be paid and no copays, deductibles or out-of-pocket expenses, except for possibly some limited amounts on prescription drugs, if your employer doesn't provide a full prescription drug benefit. However, prescription drugs are so inexpensive in Canada that by US standards, your drug costs will be negligible unless your medical circumstances are very unusual.
Others may differ on this, but where I have noticed a difference in cost of living between the US and Canada is in sales tax and cost of consumer goods. Sales taxes are much higher in Canada (because there is both a federal GST and in most provinces, a substantial provincial sales tax) and that really adds up. Until recently, it was much easier to find a good deal on consumer goods in the US than in Canada. Everything from blue jeans to computers would have similar list prices (taking currency values into account) in Canada and the US, but you could find it at a substantial discount down here much more readily than in Canada. This may well be changing due to the current historically low value of the US dollar against other world currencies (including Canada's), however.
At your income level I daresay you'd be looking into buying a house if you took the job in Toronto. Housing prices in Toronto are quite high, I believe, and [i]mortgage interest is not tax-deductible in Canada[/i].
I hope these scattered thoughts are of some help. Good luck!
Thanks for the reply. I think the tax credit issue on the US side is what I was most interested in. Are there any limitation on the foreign tax credit? Such as it only applies to a certain amount of income, AMT limitations, etc. What is this 82K shielding thing I've heard about? It that simply for US residents living in tax jurisdictions with lower marginal rates than the US?
You won't be taxable in US in the end, so don't worry about that now. Focus on your (a) Ontario taxrate and (b) cost of living in Toronto.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best