Taxation of Canadian Permanent Resident working in US with H1B


I am a Canadian Permanent Resident working on H1B in the US. In an effort
to retain my Canadian PR status and simultaneously H1B, I am planning to
join a company in Detroit and Travel from Windsor Daily. Now, will I be
taxed as a resident by US or Canada or Both?

Eagerly waiting for your response.


david ingram replies:

You will be taxed as a worker in the US and have the option of filing a
1040NR or even a Joint 1040 with your wife which would lower the US tax
substantially. However, lowering the US tax does you no good, it just means
that you will owe Canada more.

Canada will tax you as a resident on your world income and give you a credit
for the Michigan state tax, US federal tax, US FICA (social security tax)
and federal Medicare tax that you pay to the US.

Whatever you do, do NOT contribute to a US 401(K) plan through your
employer. If your employer insists that you have to participate in a
pension plan because of union rules or something else, try and convince them
to give you their half or 1/3rd of the contribution with the provision that
you will contribute to a Canadian RRSP.

Otherwise, you end up paying tax on the contributions to Canada when you put
it in the 401(K) and pay tax again when you take it out.

Another provision you can take advantage of is the number of days in the US
with regard to your H1B. The H1B has a limit of 7 years. However, if you
can show them that you are only in the US 5 days a week, they will extend
your H1B for another two years or so.


Trackback URL for this entry:

No trackback comments for this entry.