Work in Canada, live in US, tax question
QUESTION:
This is the third similar Manitoba - Minnesota question I have had in a week. Usually, this type of question involves Detroit - Windsor or Vancouver - Bellingham.
The GOOD news is that although, your husband IS taxable in Canada on his earnings in Canada from that date, Canada has no right to tax him on his US earnings. You have not been a worldwide income taxable resident of Canada since the day you moved to the US.
The BAD news is that you are NOT covered by the Manitoba Medical System and the extended benefits plan issued by your Canadian employer even if you do have Manitoba Medical and Manitoba Blue Corss cards, nu,mbers and other identification.
To be covered by the Manitoba Medical system each covered member of your family must be physically sleeping in Manitoba MORE than 183 days a year. None of you are doing that at this time. Everything you have said about vacations, schooling and commuting home each and every night absolutely - without any doubt - disqualifies you from Manitoba Medical. Another way to look at is that you were absolutely disqualified the day you took out Minnesota driver's licences and registered your car in Minnesota. Since your Blue Cross extended benefits depwnd upon your being a primary ember of the Public Health plan first, your Blue Cross is also kaput. I will compare it to your having a bunch of blank cheques with no money in your account.
You can be billed retroactively by the Manitoba system for any medical expenses paid for you by the Manitoba system since 90 days after the day the family left Manitoba to live in Minnesota. And, this would be true whether you went to another Canadian province. You might be covered by the other province's system, but you would lose Manitoba's coverage after 90 days. By the way, I have been there only a little more extreme. I attended the University of Saskatchewan (Regina Campus) and St John's College at the University of Manitoba at the same time.
For the rental, you should be filling out Canadian form NR-6 BEFORE you collect the first month's rent. YOu should notify the bank that you are a non-resident so that the bank deducts the required 10% under Article X o fthe US Canada treaty.
If you moved at the end of November last year, there is not much tax lost but you likely did not have to pay tax to Canada on the one month's consulting income earned in the US.
You should likely buy an hour of my time and you and your husband should be on the phone at the same time and you should record the conversation.
Consultation details can be found further on after the disclaimer.
These other older questions may help as well. �
david ingram replies:
You will file in Canada first and then report the income again on your US 1040 (maybe a joint return with your wife). Any tax, CPP and EI paid to Canada will be a foreign tax credit on the US return if you fill out form 1116.
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QUESTION:
My husband is a US citizen, I am Canadian. Can we save on taxes by living in US and keeping our jobs in Canada. Also understand that mtg int. is tax ded. in US. Thx. ______________________________________________-
david ingram replies:
Living in the US and working in Canada will cost you a lot more in expense although you may make up for it with a cheaper house, gas for your car and some groceries.
For instance, living in Washington State and working in BC will not save you any tax on your wages. It may save you overall a little if you have large investment income but it would have to be over $10,000 a year to be meaningful. i.e., If you live in the US, you would not pay tax to Canada on the investment income if the investmentrs were in the USA.
The biggest problem is that you would no longer qualify for BC (or other province) medical and it would cost you anywhere from $300 to $1,500 a month to buy your own equivalent US medical.
The US mortgage interest deduction is of no use to you if you are working in Canada because you will still pay full Canadian taxes first.
And it is possible for most Canadians to arrange their affairs to make their Candian mortgage deductible. Goto www.centa.com and read the November 2001 newsletter in the top left hand box. �
Hi, there. My husband has worked in Winnipeg for just under three years as an engineer.david ingram replies:
He also does contract work in the US that accounts for roughly 33% of his income. We
lived in a house in Winnipeg for the first 2 years of his employment there, but last
winter (about 11 mos ago) we moved just across the border, so he has a 1 hour commute
three times per week to work. The purpose of the move was to easily facilitate his pursuit
of a US passport, as he is currently only a greencard holder. We do not plan on applying
for permanent residence in Candada. Four days out of the week he in the US all day, and
the rest of hte family is in the US nearly all the time. Our ties to Canada are as follows:
work permits for both of us, mine open and unused, one bank account (not non-resident,
although that can be changed), one investment property that is currently vacant, but
which we hope to rent, and my husband's place of employment. Our Canadian-born son has
a US passport.
We have US driver's licenses, have registered for homestead in Minnesota, have our cars
registered and insured in Minnesota, and have three US bank accounts, including one
credit card, in the US. We have no Canadian credit cards. Our social ties in Canada
are minimal, as we keep in loose contact with a few friends that result in us spending
maybe a couple of days per month in Winnipeg, but always returning to our own home at
nighttime. We do extensive traveling in the summer, and spend almost no time in Candada
between April-September, as my husband can work from home when he's not teaching.
Our son attends school and karate in Minnesota, and we only do occasional shopping
in Winnipeg.
We have continued to pay taxes this past year as residents, and also to use Manitoba
Health for health coverage. We also pay for benefits through the University - Blue
Cross for dental, etc. Having coverage in Winnipeg is beginning to create a significant
inconvenience, and we would like to switch to private health care in the States, but
it would only be affordable if we can manage to pay fewer taxes in Canada, maybe as
non-residents. What steps should we take (ties to break, changes to make) in order
to be able to pay less tax in Canada? Would this result in any sort of significant
increase in our net income? (Our current gross in Canada is $78k and in the US it's
about $30k).
I've been looking everywhere for this information, and you look like the best hope
I have found for having my questions answered.
Thanks so much!
---------------------------------------------------------
This is the third similar Manitoba - Minnesota question I have had in a week. Usually, this type of question involves Detroit - Windsor or Vancouver - Bellingham.
The GOOD news is that although, your husband IS taxable in Canada on his earnings in Canada from that date, Canada has no right to tax him on his US earnings. You have not been a worldwide income taxable resident of Canada since the day you moved to the US.
The BAD news is that you are NOT covered by the Manitoba Medical System and the extended benefits plan issued by your Canadian employer even if you do have Manitoba Medical and Manitoba Blue Corss cards, nu,mbers and other identification.
To be covered by the Manitoba Medical system each covered member of your family must be physically sleeping in Manitoba MORE than 183 days a year. None of you are doing that at this time. Everything you have said about vacations, schooling and commuting home each and every night absolutely - without any doubt - disqualifies you from Manitoba Medical. Another way to look at is that you were absolutely disqualified the day you took out Minnesota driver's licences and registered your car in Minnesota. Since your Blue Cross extended benefits depwnd upon your being a primary ember of the Public Health plan first, your Blue Cross is also kaput. I will compare it to your having a bunch of blank cheques with no money in your account.
You can be billed retroactively by the Manitoba system for any medical expenses paid for you by the Manitoba system since 90 days after the day the family left Manitoba to live in Minnesota. And, this would be true whether you went to another Canadian province. You might be covered by the other province's system, but you would lose Manitoba's coverage after 90 days. By the way, I have been there only a little more extreme. I attended the University of Saskatchewan (Regina Campus) and St John's College at the University of Manitoba at the same time.
For the rental, you should be filling out Canadian form NR-6 BEFORE you collect the first month's rent. YOu should notify the bank that you are a non-resident so that the bank deducts the required 10% under Article X o fthe US Canada treaty.
If you moved at the end of November last year, there is not much tax lost but you likely did not have to pay tax to Canada on the one month's consulting income earned in the US.
You should likely buy an hour of my time and you and your husband should be on the phone at the same time and you should record the conversation.
Consultation details can be found further on after the disclaimer.
These other older questions may help as well. �
QUESTION: David, I am a Canadian citizen and just got my green card. My wife is______________________________________________________________
American and works and resides in the US. I work in Canada during the week and go
back to the US on weekends. How does this affect my tax filing? Am I filing as
normal in Canada or do I have to file in the US also?
Your help is apreciated.
Thanks, Vince
david ingram replies:
You will file in Canada first and then report the income again on your US 1040 (maybe a joint return with your wife). Any tax, CPP and EI paid to Canada will be a foreign tax credit on the US return if you fill out form 1116.
------------------------------------------
QUESTION:
My husband is a US citizen, I am Canadian. Can we save on taxes by living in US and keeping our jobs in Canada. Also understand that mtg int. is tax ded. in US. Thx. ______________________________________________-
david ingram replies:
Living in the US and working in Canada will cost you a lot more in expense although you may make up for it with a cheaper house, gas for your car and some groceries.
For instance, living in Washington State and working in BC will not save you any tax on your wages. It may save you overall a little if you have large investment income but it would have to be over $10,000 a year to be meaningful. i.e., If you live in the US, you would not pay tax to Canada on the investment income if the investmentrs were in the USA.
The biggest problem is that you would no longer qualify for BC (or other province) medical and it would cost you anywhere from $300 to $1,500 a month to buy your own equivalent US medical.
The US mortgage interest deduction is of no use to you if you are working in Canada because you will still pay full Canadian taxes first.
And it is possible for most Canadians to arrange their affairs to make their Candian mortgage deductible. Goto www.centa.com and read the November 2001 newsletter in the top left hand box. �
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