Still confused on how to determine residency in retirement

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nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Still confused on how to determine residency in retirement

Post by nelsona »

There is no withholding REQUIREMENT for US citizens. However, if you insufficiently estimated your US tax, you will owe and pay penalty when you file your 1040. This would be the same wherever you lived. It is the same for Cdn residents for Cdn pensions, CPP, OAS etc. You are not REQUIRED to have any tax withheld on these, but you need to come up with the taxes at some point, and if you have underpaid, they will make you pay quarterly (or be penalized), so withholding is a good idea.

The rules for Non-US citizens is different, and don't apply to you. Foreigners typically pay a flat withholding tax and that is it - no US tax return. US citizens can't do this. and this withholding for non-citizens is paid to IRS, so it is not foreign tax.

So, assume once you move to Canada you will pay 15% on your US pensions and IRAs, and have them withhold accordingly. Or send them quarterly installments of roughly the same amount. then adjust this down once you've gone through the process the first year.

And please don't use the quote feature: it clutters the posts, and I already know what I wrote.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Still confused on how to determine residency in retirement

Post by nelsona »

.. and you may aslo want to think about sending some money to CRA for these US pensions too, since the 15% yu will pay in US will be nowhere near cover your Cdn taxes on that income and on your SS income.
You will be in for a shock when you do your 70th year taxes in both countries vs. 69th in only the US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

Oh yeah the quarterly payments once retired...very true!

I don’t think I’d be underprepared for taxes when I become a Canadian citizen. Roth converting almost all of my tIRA is in the plans. In fact, in a couple of years me and my wife will only be contributing to Roth 401k, so I don’t have too much tIRA at the end.

Also, after retirement I will be gradually selling all my taxable/brokerage accounts with 0% LTCG and make it all mostly principal/basis.

So, @ age 70 I most likely will have no taxes to very little taxes. Whether in Canada or here...

I’m planning this all out now, just to figure out how much tIRA I will have @age 70. I can do all of this with federal marginal tax bracket of 12% in retirement (15% per 2016 tax table), so I have the entire 22% bracket more, for almost 10 years to utilize, if I think there’ll be a tax bomb @70.

Besides, I am a business owner enjoying 0% state tax up to $250k(only for business owners) and thanks to the federal 20% QBI deduction can pay only 19.2 marginal tax rate up to $315k of taxable income...so I have plenty of space to do Roth even now below 20% total tax...that’s why I’m trying to figure this all out. In 2019 I can do Roth conversion for 19.2% tax. I don’t want a big tax bomb @70.
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

In 2019 combined Canadian Ontario tax for up to $43,906 income is 20.05% tax and I need to be below this...capital gains is 10.03% tax and I intend to have none of this - except whenever we sell the Florida home and if I owe any capital gains then.

We both will get SS of about $50k, I don’t expect much in CPP or OAS. So I’m planning to be below SS thresholds by minimizing remaining tIRA. As soon as I’m done with Roth conversion we are moving to Canada...that’s the pivot point, not age 70 (that’s my estimate to have all of this done within the 12% marginal tax rate)
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

May be someone can help me with what I’m doing wrong with the ‘search’ function here...with every search I’ll get a few recent posts (may be up to 2018) and then the results jump to 2005 results...I can’t seem to get any posts between 2005-2017 by doing a search .....very frustrating!
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