I moved to FL about 15 years ago. Will be moving to Calgary in a couple of months for a new job. Both my wife and I are Cndn citizens and also US citizens. We plan on keeping our house in Fl for now, since we'll be hammered on real estate - besides, we love the house and our neighbors and neighborhood. I plan on renting an apt or house in Calg for now, since real estate in Calgary is as crazy as Fl was a couple of years ago.
I understand there is a tax treaty between the US and Canada, so I plan on paying my Canadian taxes and if I have to top up to the IRS or get a small refund, then whatever - I'm not really concerned about the taxes - don't get me going about the US healthcare though :-)
Suggestions/thoughts on what I need to do re: any tax implications BEFORE moving back to Canada? Thank you.
:?:
Canadian citizen moving back to Canada - questions
Moderator: Mark T Serbinski CA CPA
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deanodotcom
- Posts: 4
- Joined: Sat Oct 24, 2009 10:08 am
I guess you've been out of canada so long you've forgotten about Cdn taxation (esp. since FL has no state income tax). You need to be concerned.
You are correct that you will continue to file a 1040, since you are a USC. But your IRS tax will be miniscule compared to the tax you'll pay on your income once you are in canada.
So here's a couple of things you need to at least think about before returning.
You will become a Cdn tax resident as sson as you begin working and living in Canada, which will make any income from US taxable in canada as well, so, first thing: make sure you get any income coming to you in US (severance, etc) BEFORE you go back, otherwise it will need to be ncluded on your Cdn return.
second, you can't contribute to a Roth while living in Canada or you'll screw up the Roth tax shelter for Canada, so if you were thinking of contributing for 2009, do it before you go back.
Also, if you were thinking of recharacterizing your pensions/IRA, etc into a roth, you also need to do this before moving to Canada. If you were planning on doing this in 2010, when the income limit on such transfers goes away, then you may wish to delay 'moving' to Canada until after Jan, 01. You can work in canada, but live very temporarily there (temp housing)until after you've straightened out your roth.
I don't know if you are planning to retire in Canada, but if you are, realize that your taxable pensions (pension, 401(K), IRS) will be taxable in canada, likely at a higher rate than in US, so you should either collapse (not the best choice) or roll these into Roth before leaving US.
For any unsheltered investments you have, you may wish to sell any losers you have before leaving, as for Cdn tax purposes, all investments are considered sold and rebought the day you enter canada. So any losers you have, if you sell later, may be result in a gain in Canada and a loss in US, which would make a big taxbite for nothing. So, rule of thumb is sell losers before going back, for US citizens.
Keeping your house in US is fine unless and until you either rent it out or buy another house in canada. Then the CDn tax clock starts to run on the US home.
You are correct that you will continue to file a 1040, since you are a USC. But your IRS tax will be miniscule compared to the tax you'll pay on your income once you are in canada.
So here's a couple of things you need to at least think about before returning.
You will become a Cdn tax resident as sson as you begin working and living in Canada, which will make any income from US taxable in canada as well, so, first thing: make sure you get any income coming to you in US (severance, etc) BEFORE you go back, otherwise it will need to be ncluded on your Cdn return.
second, you can't contribute to a Roth while living in Canada or you'll screw up the Roth tax shelter for Canada, so if you were thinking of contributing for 2009, do it before you go back.
Also, if you were thinking of recharacterizing your pensions/IRA, etc into a roth, you also need to do this before moving to Canada. If you were planning on doing this in 2010, when the income limit on such transfers goes away, then you may wish to delay 'moving' to Canada until after Jan, 01. You can work in canada, but live very temporarily there (temp housing)until after you've straightened out your roth.
I don't know if you are planning to retire in Canada, but if you are, realize that your taxable pensions (pension, 401(K), IRS) will be taxable in canada, likely at a higher rate than in US, so you should either collapse (not the best choice) or roll these into Roth before leaving US.
For any unsheltered investments you have, you may wish to sell any losers you have before leaving, as for Cdn tax purposes, all investments are considered sold and rebought the day you enter canada. So any losers you have, if you sell later, may be result in a gain in Canada and a loss in US, which would make a big taxbite for nothing. So, rule of thumb is sell losers before going back, for US citizens.
Keeping your house in US is fine unless and until you either rent it out or buy another house in canada. Then the CDn tax clock starts to run on the US home.
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
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deanodotcom
- Posts: 4
- Joined: Sat Oct 24, 2009 10:08 am
Thank you for your response. No, have not forgotten about Cndn tax rates - that was the main motivation for moving in the first place - but the taxes are the taxes, so I don't worry about it other than trying to minimize them with RRSP/401k stuff and any other legal deductions.
On a separate but related note, I have increasingly been thinking that the increase in out of pocket health care costs in the US are negating the lower tax rate, esp in FL with no state income tax. I have not figured it out, and it would be very difficult to do, but it would be interesting to see what the difference in after tax $ would be inclusive of all doctor visits, medicines, etc for a "typical" person for a "typical" year. We had a dog with diabetes, and the identical medicine (same manufacturer, amount, and type of insulin) cost 3X in the US vs Canada. And this was just the insulin you could buy OTC, not a special prescription.
In any case, thank you again for your help.
On a separate but related note, I have increasingly been thinking that the increase in out of pocket health care costs in the US are negating the lower tax rate, esp in FL with no state income tax. I have not figured it out, and it would be very difficult to do, but it would be interesting to see what the difference in after tax $ would be inclusive of all doctor visits, medicines, etc for a "typical" person for a "typical" year. We had a dog with diabetes, and the identical medicine (same manufacturer, amount, and type of insulin) cost 3X in the US vs Canada. And this was just the insulin you could buy OTC, not a special prescription.
In any case, thank you again for your help.
So, like a I was saying, it would be kind of pointless to have minimized your US taxes all these years (when at most you were saving 25%) and then turn around move to Canada and pay over 40% when you take out those same pension funds.
Why not get the best of both worlds, low taxes and 'free' healthcare, if you plan right.
Why not get the best of both worlds, low taxes and 'free' healthcare, if you plan right.
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
[quote="nelsona"]I guess you've been out of canada so long you've forgotten about Cdn taxation (esp. since FL has no state income tax). You need to be concerned.
So here's a couple of things you need to at least think about before returning.
You will become a Cdn tax resident as sson as you begin working and living in Canada, which will make any income from US taxable in canada as well, so, first thing: make sure you get any income coming to you in US (severance, etc) BEFORE you go back, otherwise it will need to be ncluded on your Cdn return.
second, you can't contribute to a Roth while living in Canada or you'll screw up the Roth tax shelter for Canada, so if you were thinking of contributing for 2009, do it before you go back.
Also, if you were thinking of recharacterizing your pensions/IRA, etc into a roth, you also need to do this before moving to Canada. If you were planning on doing this in 2010, when the income limit on such transfers goes away, then you may wish to delay 'moving' to Canada until after Jan, 01. You can work in canada, but live very temporarily there (temp housing)until after you've straightened out your roth.
I don't know if you are planning to retire in Canada, but if you are, realize that your taxable pensions (pension, 401(K), IRS) will be taxable in canada, likely at a higher rate than in US, so you should either collapse (not the best choice) or roll these into Roth before leaving US.
For any unsheltered investments you have, you may wish to sell any losers you have before leaving, as for Cdn tax purposes, all investments are considered sold and rebought the day you enter canada. So any losers you have, if you sell later, may be result in a gain in Canada and a loss in US, which would make a big taxbite for nothing. So, rule of thumb is sell losers before going back, for US citizens.
Keeping your house in US is fine unless and until you either rent it out or buy another house in canada. Then the CDn tax clock starts to run on the US home.[/quote]
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Hello,
I have a similar issue but am returning to Canada from Europe as opposed to the US. Most of what you said will probably apply in some form or the other but here are my questions on it, please correct or add
1. Would opening a bank account make me a resident of Canada for tax purposes right away ? I hope to delay my return until January but do plan on opening an account before then to transfer my funds from overseas back to a Canadian account. The 'living and working' will not start until much later, as unfortunately I do not have a job lined up in Canada.
2. I am not aware of what Roth is, but I do have a pension here which basically I rolled into something like an individual retirement account. Where should i put that, as you seem to mention something about it above. The way it works here is that pension is cashable when one leaves the country with some kind of exit tax paid here. So I need to roll into some kind of retirement account or spmething similar. I do have an exisiting RRSP and can probably start contributing to it when i get back...again, tax implications if i move it before January 2010 ?
So it's basically a transfer of some funds and my pension and as said, I do not intend to start living and working in Canada until I find a new position of course. But the funds need to be moved out as I cannot keep a non resident account here, unless it is in the high end category and unfortunately, I'm not falling in that category so I have to transfer the funds somehow.
thanks very much
d
So here's a couple of things you need to at least think about before returning.
You will become a Cdn tax resident as sson as you begin working and living in Canada, which will make any income from US taxable in canada as well, so, first thing: make sure you get any income coming to you in US (severance, etc) BEFORE you go back, otherwise it will need to be ncluded on your Cdn return.
second, you can't contribute to a Roth while living in Canada or you'll screw up the Roth tax shelter for Canada, so if you were thinking of contributing for 2009, do it before you go back.
Also, if you were thinking of recharacterizing your pensions/IRA, etc into a roth, you also need to do this before moving to Canada. If you were planning on doing this in 2010, when the income limit on such transfers goes away, then you may wish to delay 'moving' to Canada until after Jan, 01. You can work in canada, but live very temporarily there (temp housing)until after you've straightened out your roth.
I don't know if you are planning to retire in Canada, but if you are, realize that your taxable pensions (pension, 401(K), IRS) will be taxable in canada, likely at a higher rate than in US, so you should either collapse (not the best choice) or roll these into Roth before leaving US.
For any unsheltered investments you have, you may wish to sell any losers you have before leaving, as for Cdn tax purposes, all investments are considered sold and rebought the day you enter canada. So any losers you have, if you sell later, may be result in a gain in Canada and a loss in US, which would make a big taxbite for nothing. So, rule of thumb is sell losers before going back, for US citizens.
Keeping your house in US is fine unless and until you either rent it out or buy another house in canada. Then the CDn tax clock starts to run on the US home.[/quote]
------
Hello,
I have a similar issue but am returning to Canada from Europe as opposed to the US. Most of what you said will probably apply in some form or the other but here are my questions on it, please correct or add
1. Would opening a bank account make me a resident of Canada for tax purposes right away ? I hope to delay my return until January but do plan on opening an account before then to transfer my funds from overseas back to a Canadian account. The 'living and working' will not start until much later, as unfortunately I do not have a job lined up in Canada.
2. I am not aware of what Roth is, but I do have a pension here which basically I rolled into something like an individual retirement account. Where should i put that, as you seem to mention something about it above. The way it works here is that pension is cashable when one leaves the country with some kind of exit tax paid here. So I need to roll into some kind of retirement account or spmething similar. I do have an exisiting RRSP and can probably start contributing to it when i get back...again, tax implications if i move it before January 2010 ?
So it's basically a transfer of some funds and my pension and as said, I do not intend to start living and working in Canada until I find a new position of course. But the funds need to be moved out as I cannot keep a non resident account here, unless it is in the high end category and unfortunately, I'm not falling in that category so I have to transfer the funds somehow.
thanks very much
d
1. No. But if you move to Canada (regardless of job) you begin being taxable in canada at that time. The postyer above has a job, so his move to canada will trigger tatxation, just as in your case.
2. You probably should leave it alone where it is. It depends whether the tax rate in your home country is lower than what your Cdn tax rate will be wjen you retire. For US residents, it usually is, and thus the advice above applies to US residents.
If you quite simply cannnot leave the funds where they are, then make sure you take them BEFORE returning to live in canada.
2. You probably should leave it alone where it is. It depends whether the tax rate in your home country is lower than what your Cdn tax rate will be wjen you retire. For US residents, it usually is, and thus the advice above applies to US residents.
If you quite simply cannnot leave the funds where they are, then make sure you take them BEFORE returning to live in canada.
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
[quote="nelsona"]1. No. But if you move to Canada (regardless of job) you begin being taxable in canada at that time. The postyer above has a job, so his move to canada will trigger tatxation, just as in your case.
2. You probably should leave it alone where it is. It depends whether the tax rate in your home country is lower than what your Cdn tax rate will be wjen you retire. For US residents, it usually is, and thus the advice above applies to US residents.
If you quite simply cannnot leave the funds where they are, then make sure you take them BEFORE returning to live in canada.[/quote]
thanks. I wanted to clarify a bit more so that I am covered.
So here is the plan.
I need to be in Canada to open up an account before i can transfer any funds. So i plan to come in for a couple of days to do that. Would that be ok as moving them BEFORE returning to live in Canada ? For now I simply plan to open up a non resident account and then a regular canadian account later. I am not sure if this plan qualifies as BEFORE.. ?
2. The pension rate is lower here than in Canada as i checked but not by much but it is lower so i could keep it.
thanks !
2. You probably should leave it alone where it is. It depends whether the tax rate in your home country is lower than what your Cdn tax rate will be wjen you retire. For US residents, it usually is, and thus the advice above applies to US residents.
If you quite simply cannnot leave the funds where they are, then make sure you take them BEFORE returning to live in canada.[/quote]
thanks. I wanted to clarify a bit more so that I am covered.
So here is the plan.
I need to be in Canada to open up an account before i can transfer any funds. So i plan to come in for a couple of days to do that. Would that be ok as moving them BEFORE returning to live in Canada ? For now I simply plan to open up a non resident account and then a regular canadian account later. I am not sure if this plan qualifies as BEFORE.. ?
2. The pension rate is lower here than in Canada as i checked but not by much but it is lower so i could keep it.
thanks !
[quote="nelsona"]1. No. But if you move to Canada (regardless of job) you begin being taxable in canada at that time. The postyer above has a job, so his move to canada will trigger tatxation, just as in your case.
2. You probably should leave it alone where it is. It depends whether the tax rate in your home country is lower than what your Cdn tax rate will be wjen you retire. For US residents, it usually is, and thus the advice above applies to US residents.
If you quite simply cannnot leave the funds where they are, then make sure you take them BEFORE returning to live in canada.[/quote]
--
Actually we are not talking about income in my case, it more just a transfer bank to bank kind of thing. I did this before when I was in the US and moved to Canada and just transferred the funds. I think only income received after landing e.g. employment, severance is subject to Canadian tax and not funds which are transferred.
2. You probably should leave it alone where it is. It depends whether the tax rate in your home country is lower than what your Cdn tax rate will be wjen you retire. For US residents, it usually is, and thus the advice above applies to US residents.
If you quite simply cannnot leave the funds where they are, then make sure you take them BEFORE returning to live in canada.[/quote]
--
Actually we are not talking about income in my case, it more just a transfer bank to bank kind of thing. I did this before when I was in the US and moved to Canada and just transferred the funds. I think only income received after landing e.g. employment, severance is subject to Canadian tax and not funds which are transferred.
I was refering to your pension. If you take out of the foreign pension sytsem after you are Cdn tax resident, it will be taxable in canada. Thus my advice to cash out the pension (if that is your intent) before leaving Europe.
What you do with the money afterwards is not 'income', as you say.
What you do with the money afterwards is not 'income', as you say.
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
[quote="nelsona"]I was refering to your pension. If you take out of the foreign pension sytsem after you are Cdn tax resident, it will be taxable in canada. Thus my advice to cash out the pension (if that is your intent) before leaving Europe.
What you do with the money afterwards is not 'income', as you say.[/quote]
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I get it; indeed if they do not allow me to keep the pension here, i will cash it out (they do have a small exit tax to pay on it if one is leaving the country) and then it is at least just funds then. thanks for the clarification.
What you do with the money afterwards is not 'income', as you say.[/quote]
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I get it; indeed if they do not allow me to keep the pension here, i will cash it out (they do have a small exit tax to pay on it if one is leaving the country) and then it is at least just funds then. thanks for the clarification.
The thing is that if the pension is cashed out after returning to Canada like after a year or so it could be explained that this is pension and not income so a kind of transfer really. I dont know how CRA views foreign pension transfers but it is something they should be reasonable about.
As for cashing it out before, I do not have a bank account in Canada to transfer the funds to so it would be difficult. No other options ?
As for cashing it out before, I do not have a bank account in Canada to transfer the funds to so it would be difficult. No other options ?
Pension is considered income when it is taken. Period. You take it while living in canada, it is taxable in canada. It is not at transfer..
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