Moving to the US tax planning.
I’m a permanent resident of the US and my wife is American Citizen. My wife myself and 2 kids have lived in Canada for the past 6 years we will be selling our house in Canada and be moving to the US, I really want to avoid further taxation in Canada so I need to sever residential ties. Here is a list I’m working on.
1. Sell our house in Canada before we move and buying a house in the US. (I don’t think this is taxable in either country correct?)
2. We will cancel our OHIP, stop Child tax benefits ect.
3. We will close our bank accounts, credit cards, except for a line of credit that we have $10,000CDN owning.
4. We have a lease through Toyota that we will hopefully payoff with proceeds from the sell of our house and take the Car with us to the states.
5. We have $11,200 owing on our Home Buyers Plan that I will not have the money to put back into the RRSP so I will need to add to our final taxes for the year we move.
6. I have 1 RRSP account with $1,400 in it, I’m thinking of cashing it in and telling the bank to hold it all back for taxes to help pay for number 5 on my list.
7. We have no stocks, or investments or other property other than our primary residence.
8. Change our Ontario Drivers licenses over to NY driver’s licenses and register our vehicles in NY State.
Am I missing anything?. CRA mentions that when you move you are deemed to have sold all your assets and than immediately require them for tax purposes. From what I have listed above do I have any of that? My car?
I have also read CRA web site about residential ties but it’s very broad, I’m assuming I would want to eliminate as much as possible. Would the Line of Credit account that we would still make payments on be considered a residential tie? What about if we held onto one of our Canadian credit cards?.
Thank you, kindly for any information.
Moving to the US tax planning
Moderator: Mark T Serbinski CA CPA
As long as you and your family move to US, you will no longer be taxable in canada on non-Cdn income.
there is no need to overly inconveneience yourself to divest yourself of all assets. The US treaty covers you if you and spouse move to US. The verbage on CRA site dels more with those moving to a non-treaty country.
You should close OHIP, since you will no longer be eligible. You should call Toyota about moving to US with a leased car.
You are probably wise to not bother repaying the HBP and closing the RRSP. You might want to wait until after leaving to close the RRSP, as this will only be taxable at 25% rather than your current marginal rate. Doesn't affect US treatment.
But other than that, nothing else need be done INCLUDING selling your house. You would want an accurate appraisal done as you move. You will not be taxed on the past gains, as long as you sell within 3 years for US purposes. You won't be taxed on the past gains at all for Cdn purposes.
Sell your Cdn real estate when it most suits you.
there is no need to overly inconveneience yourself to divest yourself of all assets. The US treaty covers you if you and spouse move to US. The verbage on CRA site dels more with those moving to a non-treaty country.
You should close OHIP, since you will no longer be eligible. You should call Toyota about moving to US with a leased car.
You are probably wise to not bother repaying the HBP and closing the RRSP. You might want to wait until after leaving to close the RRSP, as this will only be taxable at 25% rather than your current marginal rate. Doesn't affect US treatment.
But other than that, nothing else need be done INCLUDING selling your house. You would want an accurate appraisal done as you move. You will not be taxed on the past gains, as long as you sell within 3 years for US purposes. You won't be taxed on the past gains at all for Cdn purposes.
Sell your Cdn real estate when it most suits you.
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
Thank you Nelsona, I'm hoping to pay off the Toyota lease, so I can just take the car with me and not have to get envolved with talking to Toyota. I heard you cannot take a lease to another country unless you get permission from Toyota which is usually not done.
But as you pointed out everything else seems straight forward
Thank you.
But as you pointed out everything else seems straight forward
Thank you.
I have been reading the US & Canadian Tax Treaty trying to understand what I need to do for filing Canadian taxes in the Year that I move to the US and need some clarification on Some things please.
1. The year that my family and I move to the US my wife and myself are deemed Nonresident (DNR) for Canadian tax purposes (Article IV of the treaty).
2. Here is where I was hoping to get some clarification, my wife and myself have no Canadian source employment income it is all US source, I have read previous posts that said the following.
“DNR reports his income exactly like a NR, except for one difference: he/she must include foreign source income and then deduct it.â€
Question: Where is this Deducted what line on the T1 , and how much do I deduct All/Some, If we move say in April 1st of 2008 do I prorate my income and taxes paid to the US for January 1st to April 1st?, and this is my Income reported to Canada?. If this is the case I’m assuming the prorate would need to be done for the standard deductions as well.
Thanks.
1. The year that my family and I move to the US my wife and myself are deemed Nonresident (DNR) for Canadian tax purposes (Article IV of the treaty).
2. Here is where I was hoping to get some clarification, my wife and myself have no Canadian source employment income it is all US source, I have read previous posts that said the following.
“DNR reports his income exactly like a NR, except for one difference: he/she must include foreign source income and then deduct it.â€
Question: Where is this Deducted what line on the T1 , and how much do I deduct All/Some, If we move say in April 1st of 2008 do I prorate my income and taxes paid to the US for January 1st to April 1st?, and this is my Income reported to Canada?. If this is the case I’m assuming the prorate would need to be done for the standard deductions as well.
Thanks.
3 points:
1. the rules have changed slight for DNRs and they no longer "report and then deduct". (this would be deducted on line 256 by the way).
2. You will not be DNR, you are leaving canada, and thus will file a departure return, following the instructions in the "Emigrants" guide for the year you leave (you can look at the current one for guidance). You will be resident unti your leave, and non-resident afterwards.
3. Even if you were to be DNR, by leaving your spouse behind for example, you would only exclude foreign income from AFTER you departed, not for the entire year.
1. the rules have changed slight for DNRs and they no longer "report and then deduct". (this would be deducted on line 256 by the way).
2. You will not be DNR, you are leaving canada, and thus will file a departure return, following the instructions in the "Emigrants" guide for the year you leave (you can look at the current one for guidance). You will be resident unti your leave, and non-resident afterwards.
3. Even if you were to be DNR, by leaving your spouse behind for example, you would only exclude foreign income from AFTER you departed, not for the entire year.
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
Nelsona – Than you….. The "Emigrants" guide for the year you leave has helped me out allot.
As Far as my leased car, I contacted the Dealership where we got the Car, the Manager said we would have to either Pay the Car off our sell it back to the dealer and pay the difference either way it will cost allot of money that we don’t have.
Off the record however the Manager he suggest since we will be living so close to the Canadian & US boarder, just keep our Canadian bank account open that the payments for the car come out off, and Continue to use the Car. Problem with doing this is that I will need to keep my Ontario drivers license and Canadian Insurance through the remainder of the Lease. I don’t mind doing this if it does not create a taxable tie to Canada, but as you pointed out As long as me and my family move to US, you will no longer be taxable in Canada on non-Cdn income because of the Treaty between the two countries. Am I interpreting this correct?.
I still need to check with New York State DMV, because I thought they give you like 10 days from the time you enter to change your driver’s license over to NY, and what will happen once the lease is up, and then I try and exchange my Ontario Drivers License well after the 10 days.
As Far as my leased car, I contacted the Dealership where we got the Car, the Manager said we would have to either Pay the Car off our sell it back to the dealer and pay the difference either way it will cost allot of money that we don’t have.
Off the record however the Manager he suggest since we will be living so close to the Canadian & US boarder, just keep our Canadian bank account open that the payments for the car come out off, and Continue to use the Car. Problem with doing this is that I will need to keep my Ontario drivers license and Canadian Insurance through the remainder of the Lease. I don’t mind doing this if it does not create a taxable tie to Canada, but as you pointed out As long as me and my family move to US, you will no longer be taxable in Canada on non-Cdn income because of the Treaty between the two countries. Am I interpreting this correct?.
I still need to check with New York State DMV, because I thought they give you like 10 days from the time you enter to change your driver’s license over to NY, and what will happen once the lease is up, and then I try and exchange my Ontario Drivers License well after the 10 days.
The dealer's solution will NOT work.
You need to be insured where you live. period. Do not go down the road of 'faking' where you live for DMV and insurance purposes. This will usually result in (a) driving with invalid plates/DL and (B) loss of coverage when you do have an accident 9they will gladly keep taking your premiums, but will dump you when the claim comes in).
I would contact the actual leasing department of the Car company. many Cdns bring down cars for which the lease is not complete. keeping the bank account active (which you should be doing anyways for cross-border transactions) usually suffices.
You need to be insured where you live. period. Do not go down the road of 'faking' where you live for DMV and insurance purposes. This will usually result in (a) driving with invalid plates/DL and (B) loss of coverage when you do have an accident 9they will gladly keep taking your premiums, but will dump you when the claim comes in).
I would contact the actual leasing department of the Car company. many Cdns bring down cars for which the lease is not complete. keeping the bank account active (which you should be doing anyways for cross-border transactions) usually suffices.
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