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I am a 45-year-old U.S. citizen and a specialist dentist. I am considering joining a specialty practice in Vancouver, BC. My husband is a public school teacher (high school science), and would take a year or two off initially to be "Mr. Mom" if I join this practice.
Later, though, he'll be seeking a teaching job either in BC or Washington state.
I have traditionally worked for a large pharmaceutical company in the US as a consultant. Everything has
been recorded on a 1099 form, and I've paid the full load of social security tax.
My income tax situation has been pretty straightforward, although I've certainly written big checks over the past many years.
My pure income level has been about US$160,000 -- no benefits. I've paid SS tax, income tax, NY State income tax based upon that income level, minus deductions for children, mortgage insurance, etc. I also have some capital gains (and lately, several losses) on stock holdings.
I will be arriving in BC for a short visit to look around and meet face-to-face with my potential employer/partner on this Friday, August 29. If possible, I'd like to come
prepared with some knowledge about my potential tax situation.
1. I could reside on either side of the border, given the proximity of Vancouver to the border crossing.
2. The practice will do most of its work in Canada, but the owner is considering expanding to Washington state as well.
3. The owner would like me to "buy in" to the practice as a part-owner in increments over time.
Here are my initial questions:
A. Is my tax burden any different if I choose to live in B.C. vs. living on the US side of the border in Washington state? I know that there is no state income tax in Washington, but will that matter if I work in BC? Where does it make more sense to live?
B. Does it make more sense to structure myself as a self-employed independent consultant contracted with
this practice rather than becoming a part-owner and official part of the practice? Or vice-versa?
The income level should give you some idea about my income potential in Canada. We are trying to
negotiate dollars on this visit, and I may be accepting a lower pay level to avoid the heavy travel burden of my current US position.
Of course, if I accept this position, I'll also be looking for an accounting firm to help me through the quagmire of taxes between my US stock holdings and my Canadian income.
If you can give me some basic idea of the tax burdens I'll face, I'd appreciate it.
Also: as a US citizen, if I chose to live and work in Canada, paying Canadian tax, would I become eligible
for the Canadian health or pension systems?
Any help is appreciated!
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david ingram replies:
This is a pretty extensive series of questions and falls within the parvenue of a consultation for which I would normally charge $600 to $700 Canadian
However, I am going to answer the questions and use the Q & A as an addition to my newsletter and website so this reply is free.
At $100,000 Canadian, you would be paying about $33,000 Canadian for Federal Tax, Provincial tax, and our Social Security.
Your tax on any excess over $100,000 would be approximately 43 percent. So, if you earned $200,000 Canadian, your tax would be about $76,000 Canadian.
A. If you work in BC and live in Washington, you will pay tax to Canada at a single rate on any earnings in Canada First. Then you report the same income to the USA after converting it to US dollars. You would then be filing a joint tax return to the US and would owe tax to the US on the same monies. However, by filling out form 1116, you would get credit for the tax paid to Canada and would pay litle or no tax to the USA. Alternative
Minimum Tax may rear its ugly head but that would not exceed $500.00 at $100,000 per year. Any world wide income from investments,etc., would be taxable in the USA and not in Canada. In this case, you would not be
eligible for any Canadaian medical benefits.
If you were an employee. you would be paying Canadian Pension Plan payments to Canada.
Just to confuse the issue, if you were self employed, you would continue to pay into the US Social Security at the rates that you are paying now. You would not be elegible for Canadian Medical Benefits.
On the other hand, if you live and work in Canada, you would pay tax to Canada on your world income at a single rate. Your whole famil;y would also be elegible for
Canadian Medical benefits.
B. Cannot begin to answer this without knowing all the details including the visa you intend to enter Canada under. If you are coming as an employee, you cannot be self-employed although I admit many people end up as
self-employed for one person and therefore bypass the regulations.
C. The taxes will be higher for you in Canada because you cannot file a joint tax return. You should have us or someone do two sample returns for you so that you see what will actually happen.
If you turn to www.centa.com and read the US/Canada Taxation section, it will help you realize the difeerences between the systems. If you wanted to see me on Friday Afternoon or Saturday morning, or even Sunday morning, that could likely be arranged
Last, but not least, If you live in the US, your husband will have less problems in terms of his getting employment.
Hope this helps
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or
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