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Two items in the New US tax bill are significant to my readers:
One: The elimination or reduction of taxes on dividends has already been discussed in the National Post by Peter Morton.
His article covers it pretty well at http://www.nationalpost.com/search/site/story.asp?id=B315192B-EBFB-4F66-B867-709376D872C8
For their taxes, this will not have any effect on Canadians or Americans in Canada because Canada will not recognize the tax free status of American dividends.
It will certainly have an effect on the market as stocks that are US taxable (Daimler-Chrysler, Seagramns, etc.) will not be attracting investors in the same manner. It might be a good idea to get out of all foreign controlled stocks in the near term.
T W O
BUT === and I say BUT what everyone is ignoring is the Senate Bill's Revenue Raisers provision that will eliminate the $80,000 exemption for money earned by US citizens out of the country and affect just about every US citizen in Canada..
This is BIG because it will affect every working US citizen in CANADA and there are a lot.
It will also draw many more Americans into the tax filing fold because they have had the idea that as long as they earn less than $80,000, they do not have to file. Now, there will be no excuse for anyone to say they didn't have to file because they were not taxed anyway. Now everyone with an income of over $24,500 US will have no excuse at all.
A married person filing separately will usually have a US alternative minimum tax at more than $24,500 US.
A married person filing jointly will usually have an alternative minimum tax at a family income of over $49,000 US.
A single person filing would usually pay alternative minimu tax at more than $35,750 US.
Of course, these figures will likely change a bit because another part of the bill promises to get rid of the marraige penalty.
For my example I have used an American citizen living in Canada and married to a Canadian. He/She is going to file as "married - filing separately."
He/She was born in 1960 and has three children.
His or her income is always: Capital Gains 1,000
Dividends 1,000
Interest 1,000
Salary varies from 30,000 US to 110,000 US
This is because- until now, any US citizen in Canada was essentially US tax free up to $100,000 US
Earn A M T
NOW: $ 30,000 pay $ 215
40.000 475
50,000 735
60,000 995
70,000 1,225
80,000 1,567
90,000 1,892
100,000 2,217
110,000 2,561
Then I acknowledged that if this person had paid 16,000 US for mortgage interest and $4,000 for property taxes and $4,000 US for charity, their AMT would be reduced.
I only calculated it for one amount and that was the $110,000 one. In that case he/she would only pay $1,892 instead of
$2,561. This is because the $4,000 Charity and the $16,000 Mortgage interest reduced him back to the $90,000 level.
Since these amounts are so different for every family and the exchange rate is flipping around so much and the bill is not finalized, I leave it to you to figure out whether you want to play with exchange rates and if you do want to make a flow chart I would be happy to oblige (i.e the $110,000 fellow may be paying $16,000 mortgage interest but the $30,000 fellow is paying much less).
David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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