Is income tax higher in the US or Canada? - it DEPENDS

I'm a Canadian citizen living and working in Niagara Falls, ON. I married a US citizen in November and have applied for a K3 visa. If and when I move to Buffalo, NY to live with my wife (who won't relocate here), I'll still be working in Canada as I have a good job. Do I pay taxes as usual to CRA and do the AMT in the US or can I just pay the IRS..?? I can't receive health care, unemployment or pension from the Ontario government anymore if I live in New York, so I'd rather pay US taxes as they are lower.

Any help you can provide would be appreciated.

david ingram replies:

You will continue to pay Canada taxes just as if you lived in Canada.

Then you will report the income on your US return and file form 1116 to claim the credit for the Income tax, CPP and EI that you paid to CANADA.

The AMT does not apply anymore in your situation.

However, you are incorrect about New York having lower taxes.

If you were comparing Toronto and New York City, New York City is much higher.

Calculated as Married filing separately.

However I used $50,000 US as a Niagara falls New York salary and that works out to $2516.00 State tax, $6,951.00 Fed Tax, $3,100 FICA and $725.00 Medicare for a total of $13,292 US or $15,074.37 Cdn at 1.1340936

At the same exchange rate, $50,000 US is $56,704.68 which earns Ontario Tax of $4,044.59, Fed Tax of $8,231.00, CPP of $1,910.70 and EI of $729.70 for a total of $14,915.99 Canadian.

With the exception of mortgage interest as a deduction, the other deductions in the US are NOT AS GOOD as Canadian deductions and since I can (with a little time and reorganization) make a Canadian mortgage deductible as well (Nov 2001 Newsletter in top left hand box at, I do not take that into consideration.
The following answer goes even further


I am a U.S. citizen and resident, married to a (non-working) dual U.S.-Canadian citizen. I recently learned that the company where I've worked for the last 20+ years is closing its doors near the end of this year. I'm 55 and can't get my pension for at least 5 years...10 years if I want a full pension. We've been thinking of the idea of moving across the border to Canada (wife would sponser me), and I have a question. Would it make any sense tax-wise for me to live and work in Canada, pay into CPP for 5 or 10 years? I understand that Canadian taxes are higher than in Michigan, and I have mutual funds and other savings that are generating about $10,000 in yearly interest/dividends/capital gains that I would be leaving in the U.S.


david ingram replies:

As an esoteric exercise, I decided to see what the difference actually was because Canadian taxes are NOT always higher than the US, particularly where two spouses have equal earnings.

The big difference is that the US has a joint tax return rate and when one spouse works an the other does not, a discrepancy does arise.

I used a US salary of $60,000 and a joint 1040 and MI 1040.

I did not use any deductions other than the standard deduction and did not claim for any children.

The results were

US fed tax of 5.714
MI tax of 2,083
FICA 3,720
Medicare 870
For a total of 12,387 which converts to $14,048.02 in Canadian funds
If you had lived in Detroit, the city tax would be $1,470 changing the figures to
a total of $13,857.00 US or $15,715.14 Canadian

I converted the $60,000 to $68,045.62 Canadian

The results were
Cdn Fed tax of 9,581.69
ON tax of 4,659.14
CPP of 1,910.70
EI of 729.30
for a total of 16,880.83 which converts to $14,884.86 in US funds

The difference is $2,497.86 or about $200 a month. if you did not move from a Michigan city with a tax return or a difference of (14,884.86 - 13,857) $1,027.86 if you moved from Detroit

Then - (I was intrigued) I tried it with you both receiving $30,000 US

The results were

US fed tax of 5.714
MI tax of 2,083
FICA 3,720
Medicare 870
For a total of 12,387 which converts to $14,048.02 in Canadian funds
and $1,470 Detroit tax 'IF' There is no change

Then I decided to show what would happen to a couple who moved to Canada and both worked equally.

I converted the $60,000 to $68,045.62 Canadian but split it into 2 returns of $34,022.81

The results were
Cdn Fed tax of 3,474.97 x's 2 or 6,949.94
ON tax of 1,721.67 x's 2 or 3,443.34
CPP of 1,510.88 x's 2 or 3,021.76
EI of 636.23 x's 2 or 1,272 .45
for a total of 14,687.49 which converts to $12,950.86 in US funds

and is only a difference of 12,950.86 - 12,387 or $563.86 or less than $50.00 a month AND qualifies your wife for her own CPP.

Of course, if you moved from Detroit to Windsor, you would be paying ($13,857 - 12,950.86) $906.14 LESS living in Canada.

For the record, I would normally charge a minimum of $400 Cdn for this 'what if' calculation and your question was rejected originally along with another 100 or so. However, it caught my eye and I decided to use it as a major answer.

The investment part of your income will also cause some differences because Canada will tax the dividends and capital gains differently,likely a little more. However, if you switched your accounts to Canadian securities, the tax may be a little less because of Canada's dividend tax credit.