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QUESTION:
I am Canadian citizen with RRSP savings. I plan to move to the USA as a resident as soon as all papers are ready. I work in the USA currently with H1B but live in Canada (wife & kids).
Up till now I file US returns and then file Canadian returns.
When i finally move to the USA with no residential tie to Canada other than being a Canadian citizen and having RRSP contributions, what tax obligation do I have to Canada. Should I withdraw all my RRSP and transfer to US IRA, so that I can avoid all Canadian taxes. or if I keep RRSP - what tax forms am I supposed to fill in Canada.
Currently since I do not earn any income in Canada, I give more tax to Canada in order to keep my family comfortable in Canada, most time no refund from Canada tax.
What do you advise as per direction to go which will pay me more financially. Do not want to move to US yet until permanent residency is available. I want the best of the two worlds financially in respect of tax.
Investing in Canada like having a rental property - how does that affect my tax filing when I am no more living in Canada, if I choose to buy a rental property - or forget such ideas.
Thanks for your response.
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david ingram replies:
You need to go to www.centa.com and read the [US/Canada Taxation] section. It has a copy of Article IV of the US / Canada Income tax Treaty and it is quite clear hat if you and your wife and kids are in the US, you are taxable in the USA only on your world income.
If you happened to own a rental house in Canada (maybe you rent out your own house) you would pay tax to Canada first under Section 216(4) and then report it again in the US on your 1040 Schedule E. If you had paid tax to Canada, you would claim that tax as a foreign tax credit on form 1116 of your 1040.
If you were my client and had applied for your green card and your wife was only in Canada while waiting for the paperwork, I would file you as a non-resident of Canada. I would also file a joint return for the US. Depending on your income, this legal technique could save you up to $6,000 a year of income tax payments.
Hope this helps
Remember, we do this for a living. If I am not available and you call, ask for Gail Ritter or D'Arcy von Schleinitz or Sonja Clark CPA, CA, LLB at:
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 consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
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