This is the first time I have done such a move. I don't want to get caught in a tax 'quagmire' of living, working and bening paid in the US versus taxation in Canada.
I am interested in finding information that would assist me in this transition.
Some information that may help answering my questions:
1. Working for and paid by a US based company in US dollars. No Canadian employment connection.
2. In the US on a TN-1 visa obtained in Jun-05 - valid for one-year.
3. Current duration of employment documented as to end of Jul-05, but anticipated to be revised to two-years.
4. Family members remaining in Canada until employment extended, at which time they will relocate with me to US.
5. Intend to sell Canadian property (home) once employment extended.
6. Considering purchase of property (home) in US, but feel leasing may be more desirable from taxation standpoint.
7. Would like to return to Canada someday, but currently no employment connection. Potential for US employer to transfer me to Canadian office at end of two-years.
Any assistance/advice is appreciated.
Dave Bennett
Houston
Temporary Relocation to US
Moderator: Mark T Serbinski CA CPA
Dave,
A couple of points regarding "until employment extended".
As a TN, your employment will always be for one year at a time, so you will not be 'extensded' until May or June of 2006 at the earliest, and at that time it will only be for another year, and this process will continue as long as you remain on TN.
So, you might want to reconsider waiting to move them until your work is extended, as it will not occur soon. I might also suggest that you get work status of longer durartion, such as H1-B if you are eligible.
Since your house and spouse will remain in canada, you will be taxed in Canada and Province of residence on ALL your income.
many people in your situation choose to quickly rent out their Cdn home to avoid all Cdn taxation of their US income. This may not be feasible if your spouse works in Canada, of course. Non-residents who rent out their homes must be sure to remit a portion of the rent MONTHLY to the Govt.
You will also be taxed in US and state of employment on at least your employment income, and possibly your world income as well (you will have a choice for 2005).
You will be entitled, on your Cdn/Prov returns to foreign tax credits based on your US income, and the IRS, state, SS and medicare taxes you pay in US.
The result will likely be a taxrate slightly higher than what you would have paid if your worked solely in Canada.
Point 6. There is no <u>tax</u> advantage to leasing over buying (in fact opposite). However, given your reluctance to establish yourself in US, you likely are better off to rent in <u>terms of planning/mobility</u> .
<i>nelsona non grata... and non pro</i>
A couple of points regarding "until employment extended".
As a TN, your employment will always be for one year at a time, so you will not be 'extensded' until May or June of 2006 at the earliest, and at that time it will only be for another year, and this process will continue as long as you remain on TN.
So, you might want to reconsider waiting to move them until your work is extended, as it will not occur soon. I might also suggest that you get work status of longer durartion, such as H1-B if you are eligible.
Since your house and spouse will remain in canada, you will be taxed in Canada and Province of residence on ALL your income.
many people in your situation choose to quickly rent out their Cdn home to avoid all Cdn taxation of their US income. This may not be feasible if your spouse works in Canada, of course. Non-residents who rent out their homes must be sure to remit a portion of the rent MONTHLY to the Govt.
You will also be taxed in US and state of employment on at least your employment income, and possibly your world income as well (you will have a choice for 2005).
You will be entitled, on your Cdn/Prov returns to foreign tax credits based on your US income, and the IRS, state, SS and medicare taxes you pay in US.
The result will likely be a taxrate slightly higher than what you would have paid if your worked solely in Canada.
Point 6. There is no <u>tax</u> advantage to leasing over buying (in fact opposite). However, given your reluctance to establish yourself in US, you likely are better off to rent in <u>terms of planning/mobility</u> .
<i>nelsona non grata... and non pro</i>
Nelsona
Thanks for the quick reply. I wish to clarify some of the issues you mentioned.
I am currently working on an engineering project that has recently gone through a bid submission to a client. There is no guarantee of work (with this employer) for me beyond the end of July unless we (the US company I am working with) are successful in receiving the contract to proceed with the project. So, when I refer to an employment extension, I am referring to continuation of employment beyond the end of July, and not an extension to the TN-1 visa.
A TN-1 visa was used due to a) the 'temporary nature' of my employment at the time of entering the US and b) the ease in which it was obtained. If I correctly interpret your reply, I would be advised to change my status from TN-1 to H1-B if and when we receive this contract.
It is my intention to relocate my family to the US if and when we receive this contract and I can foresee a much longer stay in the US - possibly by the end of July. At this time we will sell our home in Canada.
My spouse does not work, and has no intention of working in the US.
With regards to rent versus purchase a property in the US, I am leaning towards renting solely from a standpoint of being able to quickly return to Canada. As 'quickly' is a relative term, I am obviously going to have to consider what my long-term situation may be. It's the old question of throwing away money for rent when you can purchase an appreciating asset (i.e. home) and reap the benefits of the financial gain at the time of sale.
However, another point to ponder is the tax implications of selling a Canadian property and suffering the consequences of taxation on the proceeds when they are taken out of Canada. If there is a possibility of remaining in the US for more than two-years, is it advisable (from a taxation viewpoint) to become a non-resident of Canada? Could your firm provide specific direction (of course for a suitable fee) based on my tax situation?
Another point to ponder is that I ws unemployed prior to accepting this position on the US, and had no income in Canada for the first six-months of 2005. I don't know if this is relavent to our current conversation, but may have an impact on the numbers generated to determine my tax liability in the US and Canada.
Regards again.
Dave Bennett
Houston
Thanks for the quick reply. I wish to clarify some of the issues you mentioned.
I am currently working on an engineering project that has recently gone through a bid submission to a client. There is no guarantee of work (with this employer) for me beyond the end of July unless we (the US company I am working with) are successful in receiving the contract to proceed with the project. So, when I refer to an employment extension, I am referring to continuation of employment beyond the end of July, and not an extension to the TN-1 visa.
A TN-1 visa was used due to a) the 'temporary nature' of my employment at the time of entering the US and b) the ease in which it was obtained. If I correctly interpret your reply, I would be advised to change my status from TN-1 to H1-B if and when we receive this contract.
It is my intention to relocate my family to the US if and when we receive this contract and I can foresee a much longer stay in the US - possibly by the end of July. At this time we will sell our home in Canada.
My spouse does not work, and has no intention of working in the US.
With regards to rent versus purchase a property in the US, I am leaning towards renting solely from a standpoint of being able to quickly return to Canada. As 'quickly' is a relative term, I am obviously going to have to consider what my long-term situation may be. It's the old question of throwing away money for rent when you can purchase an appreciating asset (i.e. home) and reap the benefits of the financial gain at the time of sale.
However, another point to ponder is the tax implications of selling a Canadian property and suffering the consequences of taxation on the proceeds when they are taken out of Canada. If there is a possibility of remaining in the US for more than two-years, is it advisable (from a taxation viewpoint) to become a non-resident of Canada? Could your firm provide specific direction (of course for a suitable fee) based on my tax situation?
Another point to ponder is that I ws unemployed prior to accepting this position on the US, and had no income in Canada for the first six-months of 2005. I don't know if this is relavent to our current conversation, but may have an impact on the numbers generated to determine my tax liability in the US and Canada.
Regards again.
Dave Bennett
Houston
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">However, another point to ponder is the tax implications of selling a Canadian property and suffering the consequences of taxation on the proceeds when they are taken out of Canada<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
There are no such implications/consequences. Your Cdn home is exempt from Cdn taxation, as long as you sell it within a year of leaving canada, and there is no such thing as taxation of assets taken out of Canada.
Your EI is irrelevant to this discussion, except that becoming a non-resident would avoid you having to possibly repay some EI if you make more than the allowable wages the rest of the year.
From a pure taxation point of view, it is always better to live and work in the same tax jurisdiction. I'm not speaking of any other benefits of remaining in Canada, though.
I don't work for this or any other firm, so you will have to contact them directly if you want consultation.
My opinion, and what I did, was break ties as sooner rather than later. In your case, even simply having your family join you would go a long way in ceasing Cdn taxation, even if you did not immediately rent out or sell your Cdn home.
<i>nelsona non grata... and non pro</i>
There are no such implications/consequences. Your Cdn home is exempt from Cdn taxation, as long as you sell it within a year of leaving canada, and there is no such thing as taxation of assets taken out of Canada.
Your EI is irrelevant to this discussion, except that becoming a non-resident would avoid you having to possibly repay some EI if you make more than the allowable wages the rest of the year.
From a pure taxation point of view, it is always better to live and work in the same tax jurisdiction. I'm not speaking of any other benefits of remaining in Canada, though.
I don't work for this or any other firm, so you will have to contact them directly if you want consultation.
My opinion, and what I did, was break ties as sooner rather than later. In your case, even simply having your family join you would go a long way in ceasing Cdn taxation, even if you did not immediately rent out or sell your Cdn home.
<i>nelsona non grata... and non pro</i>