I am married to a Canadian citizen. We are thinking of moving to Toronto in the near future. My husband is in biotech and I work in social media/advertising. I am wondering if I will have to pay taxes on my Canadian income to Canada and to the U.S. Thanks for your help.
Canada - 2 Answers
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1 :
You will pay tax to your cdn income to canada, but not to the USA. When u move back with your husband to Canada, have a cdn home, establish cdn economic and social ties, you are considered a cdn resident for tax purposes pursuant to article 4 of the canada-us tax treaty, and need to pay cdn taxes only, not US taxes. If u are a cdn resident, any future US income will also be subject to cdn taxation, and US taxes from those US income will be give foreign tax credit by the cdn govt. Addendum: After reading the other answer, I disagree with his view that the Canada-US tax treaty has nothing to do with your situation. It has. The fact that u have been living and presumably working in the US and therefore had US income and filing US tax return. The most important and critical is your first year in Canada living and working, having a cdn home, and may also in the process of selling or being rented out the US home while u r in Canada, with some US inevstment income, and maybe severance pay payable in your first year in Canada or at a later year, etc. And, u may also move to Canada during the year, say May 1, instead of January 1, and the dispute between the Canada Revenue Agency and the IRS is whether u are in fact a cdn resident and which country has the right to tax your Cdn and US income, but the Canada-US tax treaty provides the rules. For example, if you receive your severance pay from your uS employer in your 2nd year in Canada, the other person answering your question, per his reply, would require u to report the severance pay into cdn income in your 2nd year while the IRS would tax it because the pay arose in the US. The correct answer is that you do not need to report the severance pay into your cdn income, as the IRS would claim the exclusive right to tax the severance income because the income arose during your prior employment in the USA before you become a cdn resident. While some cases went thru unnoticed without being reviewed by the tax authorities of both countries (as the other person might personally have experienced in all his works), many cases did end up in the negotiation meetings between CRA & IRS pursuant to the Canada-US tax treaty.
2 :
Yes. As a US Citizen, you will always be required to file a 1040 and pay taxes on your world income. As a Canadian Resident, you will be required to file a T1 and pay taxes on your world income. You will then claim a Foreign Tax Credit on your Canadian return for taxes paid to the US. The US-Canada tax treaty has NOTHING to do with this.
