Self-employed writer - David

My_question_is: Applicable to both US and Canada
Subject:        Self-employed writer
Expert:         taxman at
Date:           Friday October 06, 2006
Time:           07:46 PM -0400
I am a self-employed writer, earning my income in the U.S., where my legal
residence is in Colorado. However, I will have spent around 180 days this
year in Vancouver, where I own a second home. From what I've read, I will be
OK taxwise this year, but am worried about next year as I would like to
become a permanent resident of Canada, and will be applying soon for
permanent resident status. Is there anything I can do to avoid double
taxation? Does being an official applicant for permanent residency help?
david ingram replies
There is very little double taxation although we do have one right now where
the lady client has tax to pay to the US for 2002 because she sold some tax
free shares in a CCPC (Qualified Canadian Controlled Private Corporation).
In this case, one can make up to $500,000 tax free and she made $95,000.
Because the US does not recognize the tax free status, she owes the US tax
on the Canadian Capital Gain.
However, it is not as bad as it seems.  We have been able to carry enough
unused Foreign tax credits forward from 98, 99, 2000 and 2001 to wipe out
all the tax but $1,800 and that is a very small price to pay for the
privilege of being able to work back and forth between the two countries at
If you are in Canada more than 183 days, Canada has the right to tax on your
world income whether you are here as a visitor or a permanent resident.
If you are here for 35, 76, or 100 days with the intention of moving here,
Canada has the right to tax you on your world income from the day you
However, under the terms of the US Canada Income Tax Convention (Treaty).
Article IV (2) a, b, c and d  AND then Article XIV will govern which country
gets first crack at what.
If you are self employed and living in one country without a fixed base in
the other country, the country of residence gets to tax you and you only pay
social security tax to the country of residence.
However, no matter who has first crack, the other country will give you a
foreign tax credit for the tax paid to the other country.  If effect,
because of the foreign tax credits, there is rarely any double taxation.
There is sometimes unexpected taxation as explained above.  A place where
Canada levies an unexpected tax is when an American has US tax free
municipal bonds and Canada taxes them.
Goto and read the Oct 1995 newsletter in the top left hand box
and the US/Canada section in the second box down on the right hand side.
(You will also find Article IV there.)
They will go a long way towards telling you what your tax situation will be.
And if you are a single person and arrange your Canadian affairs properly to
make your
Canadian mortgage deductible, you will pay LESS tax in Vancouver, Canada
then in Denver, Colorado.
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 10 PM 7 days a week  Vancouver (LA) time -
(please do not fax or phone outside of those hours as this is a home office)
email to taxman at <mailto:taxman at> <>
Disclaimer:  This question has been answered without detailed information or
consultation and is to be regarded only as general comment.   Nothing in
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