Relocating back to Canada from US after 4 years

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John Smith
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Relocating back to Canada from US after 4 years

Post by John Smith » Wed Dec 01, 2004 11:02 am

I am a Canadian citizen, who relocated from Canada to the US 4 years ago to join a new employer. I am now relocating back to Canada from the US, with the "same" employer. The parent company is US-based, and there is a Canadian business unit. I will be an employee of the Canadian business unit, paid in CDN dollars, with different benefits, etc.

I will be closing on my new house in Canada in '05.

I will be selling my current house in Ohio. There is a relocation company engaged. I believe if I find a buyer on my own (eg. in Dec. '04), then the reloc company buys my house at that time from me, and then deals with the buyer separately at the agreed upon closing date. This could occur in '04 or '05. I have the option of selling to the reloc company after a certain time frame at an appraised value if I can't sell the house on my own.

The relocation company will be paying Final Move allowance, Final move Meal allowance, Misc. Allowance. I believe I will be getting paid in US funds in 2004 for these amounts. they total around $5500 US.

I believe these are considered taxable benefits, payable to the IRS for my '04 return. My question for this portion of the post is: Is there any benefit of having the payment of the $5500 US delayed until '05, paid in CDN funds? That is, are these allowances considered taxable benefits under Canadian tax law for a Canadian citizen relocating back to Canada after 4 years in the US? If they are not considered taxable benefits, then I will delay the payment. If they are considered taxable benefits, then I will get the payment of $5500 US paid in US funds in '04, so my taxes will be less.

The reloc company will also be paying for my closing costs on the sale of my house in Ohio (including realtor fees), paying for moving my goods back to Canada, and then paying for the closing costs on the purchase of the new home in Canada (including Land Transfer Tax). Can anyone confirm whether these are considered taxable benefits for a Canadian citizen relocating back to Canada after 4 years in the US? I am assuming they're not, but I haven't been able to get a confirmation to date.

I appreciate any help anyone can provide.


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Post by nelsona » Wed Dec 01, 2004 7:13 pm

You keep saying that it is the relo company that is paying for this and that but, in fact, it will be be either your old or new firm.

As such these will be taxable in US in either year; They would only be taxable in Canada if the total reimbursement was more than C$15,000 (half of the excess would be taxable). And this would only be the portion paid after re-establishing Cdn residency.

Remember too, that your moving expenses are NEVER deductible on your Cdn return when returning to Canada.

The fact that you've been away 4 years, or that you would be paid in Cdn funds doesn't enter into the picture.

<i>nelsona non grata</i>

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Post by MaggieA » Wed Dec 01, 2004 9:02 pm

Hmm, are the allowances taxable because they are allowances rather than expenses?

I was transferred to US in 2002 by my employer, with some services provided by a relocation company. Most of my moving costs were paid directly by the employer (via the relocation company I guess), and I was reimbursed for some out-of-pocket expenses, based on receipts submitted. I confess it never even crossed my mind that any of this might be <i>taxable.</i> Heck, it wasn't my idea to move to the States; nobody mentioned any idea I should pay extra tax for this "privilege".

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Post by nelsona » Thu Dec 02, 2004 2:00 am

Remember that there is a VAST difference in US and Cdn views of deductible moving expenses. There is also a difference for transferees.

When you move to US, your firm will cover MANY expenses (it has to be an accountable plan) and all but a very strict ammount is taxable. Otherwise it is ALL taxable, and then the taxpayer is responsible for deducting the allowable expense. Even if the money never crossed your hands, it still added to your W2 (Maggs, you might want to lokk back at your W2 for that year and you may see that it says you made a whole lot more than what you actually got paid.

In Canada, ESPECIALLY for internal transfers (you would have to check if cross-border transfers are covered) almost ALL paid expenses are non-taxable (way more than the IRS narrow list)

<i>nelsona non grata</i>

Mark T Serbinski CA CPA
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Post by Mark T Serbinski CA CPA » Fri Dec 17, 2004 10:27 am

On a related topic, Canada does allow a deduction for moving expenses from outside of Canada, but only if you were considered a tax resident of Canada during your absence.

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