Tax Planning

One of the most common challenges for Canadians seeking sound cross border tax advice is weeding out the misinformation. Most professionals restrict their practices to dealing with issues on only one side of the border. Finding professionals who know the laws in both countries, how they interact, all of the filing requirements, as well as the Canada-U.S. tax treaty can be very difficult.

Canadian residents who depart and become U.S. residents for tax purposes are deemed to have disposed of assets at fair market value. This event may give rise to a capital gain. A capital gain triggered by departure is commonly referred to as departure tax. Departure tax is a prime example of an area where there seems to be lots of misinformation.

Departure tax is not a new tax: it is actually a capital gains tax in disguise. With proper cross border tax planning the tax on such gain may be deferred, minimized or actually eliminated in some cases. For more information, refer to the article, Canadian departure tax: obstacle or opportunity? by David A. Altro and Matt C. Altro, published in STEP Journal (June 2012).

For those who neglect to plan properly or who receive poor advice often find themselves in trouble with the CRA or IRS. However, with the right cross border tax recommendations, Canadians may find that the U.S. can be a tax haven. One example of this can be found when comparing income tax rates in the U.S. and Canada.

The highest marginal rate for a Florida resident is 39.6% while for Quebec residents it is over 53%. To truly understand the tax savings it is important to understand that Quebec residents reach the highest marginal rate at approximately $202,800, whereas Florida residents reach their highest marginal rate at just under $420,000.

To learn more about the tax issues when becoming a U.S. resident, view the media resources below.

Canadians and US Real Estate Laws

Many Canadians dream about owning a property in the US for retirement or investment purposes or simply to escape winter. Regardless of the reason for owning US property, Canadians need to be aware of the rules and tax issues they are subject to when renting or selling such property. Rental Income If Canadians rent their US real estate for 15 days or more, they may have to file a US income tax return to report their rental activity. Rental income paid to Canadians is subject to a 30% US federal withholding tax. This amount is applied to gross rental income, […]

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