Moving to US w/ Wife (Maternity & Departure Tax QUestion)

[solace]

Hello all,

Apologies in advance if all or parts of these questions have been answered - I did my best to find similar threads on the forum.

I am moving to the US in January of 2019 with my wife to take up work there with the company where I work. I have an L1A visa and she and our child will come in on an L2. We had our baby just this past year in June. I plan on departing Canada for tax purposes in order for us to file jointly in the US next year. I will be the only bread winner in the family so filing jointly in the US and doing our taxes only in the US will be the best case scenario. I have two main questions:

1) She is currently receiving maternity benefits as part of her maternity leave from her job which will continue into next year (April). As part of departing canada and in order for us to only be taxed on my US income, does she need to suspend her maternity benefits? By continuing to receive them would this indicate to the CRA that we should be taxed on our global income?

2) We have two properties in Canada. One where we live and one where my parents live, both are jointly under my name with outstanding mortgages. Our house is our primary residence and we will put it up for rent before we leave, hoping to begin renting it on January 1st 2019. How would departure tax work on these two properties? DO we need to pay a departure tax on both? We don't want to pay a departure tax on either.

We have no other relevant assets, investments or rrsps etc in Canada.

Thank you in advance for your help!

[nelsona]

1. No , she does not have to stop mat benefit payments, whether they be from her employer, or from Service Canada. Who is paying her? neither of these would make either of you Cdn residents for tax purposes. These payments would be taxed in both countries (first in Canada and then is US with credit for Cdn taxes). How they are taxed in Canada would depend on the source

2. Cdn property is not subject to deemed disposition tax, as it will always be subject to tax in Canada regardless of where you live. You will need to get appraisals for both properties for you future taxation, particularly of the one that is your primary residence. You do not need to "do" anything with those properties to be still considered non-resident after your leave Canada; your life in US makes you resident there.

You will need to get familiar with how CRA and IRS tax rental property, and when you sell, and how CRA taxes mat leave for non-residents.

[solace]

Nelsona,

Thanks a lot for the reply - much appreciated. You are doing a great justice for a lot of folks on here.

To answer your question, Maternity in Canada is paid through Service Canada (Government).

Thanks Again.

[nelsona]

So, your spouse would begin paying NR withholding tax on her Mat leave, at 25% in Canada (she MUST tell SERVICE Canada that she is leaving), as final Cdn tax. then she reports the income on her 1040, and take a foreign tax credit on form 1116

At the end of 2019, she could do a Cdn tax return (a 217 return) in which she may be able to reduce the Cdn tax, probably to zero. That way she would only pay tax in US, and you would not have to worry about tax credit.

You would probably want to declare a departure date sometime in December 2108, so that you can get all the exit tax, residency determination, etc out of the way this spring rather than wait a whole year (if you declare your departure in Jan of 2019).