Canada US tax planning
December 20, 2018 11:18 PM   Subscribe

Canadian living in the US for the next few years, how to best plan my tax situation? Do you have a good cross border tax advisor? More inside...

I live and work and pay taxes in the US. Eventually (3-5yrs) I'll move back to Canada.
I need help on things like:
- do I contribute to 401k or child education savings while I'm here?
- cost benefit analysis rent vs buy (I have no clue how this mortgage interest deduction works)
- can I send money back to myself in Canada while the exchange rate is low?
- anything I'm missing?

Do you have a good cross border tax strategist or website? please let me know!
posted by St. Peepsburg to Work & Money (6 answers total) 3 users marked this as a favorite
 
Best answer: (I have no clue how this mortgage interest deduction works)

There are two ways to claim deductions against your income in the US: the "standard deduction" and "itemized deductions". You must elect to do one or the other. With the standard deduction, you just lop off a fixed amount from your income and proceed to calculate the tax on the rest; this amount is $12,000 for the 2018 tax year for a single taxpayer, or double that for a married couple. (Note that these deduction amounts were raised substantially by the tax bill earlier this year; they're almost twice what they were last year.)

You also have the option to itemize deductions. In this scenario, you add up all of the expenses you had in certain categories, and deduct that amount from your income. Deductible expenses can include medical/dental expenses (above a certain fraction of your income), state & local income or property taxes, charitable gifts, and interest paid on mortgages.

Importantly, though, if you add up all these numbers and it's less than the standard deduction, then it's usually to your advantage to just take the standard deduction. In other words, if your bill for your mortgage (along with property taxes & local income taxes) is too small, then you can't really take advantage of this deduction. My impression is that with the standard deduction being as high as it is, the mortgage interest deduction is moot unless you buy a rather expensive home in an area with relatively high local taxes.
posted by Johnny Assay at 4:31 AM on December 21, 2018


Please ignore any advice you get in this thread that is not a referral to a tax adviser / accountant.
posted by seanmpuckett at 4:46 AM on December 21, 2018 [1 favorite]


Best answer: Have a chat with Eileen Mendelsohn at Mendelsohn & Gangbar CPAs. We use Eileen for ms scruss's annoying cross-border tax situation, and she's untangled a friend's complex US/CA company situation.
posted by scruss at 6:23 AM on December 21, 2018


Best answer: I also know a cross-border accountant; feel free to memail me for details. (I don't feel comfortable publishing details in a public forum without permission.)

Also: beware that Canadian tax-exempt savings vehicles (RRSPs, TFSAs) are not necessarily tax-exempt in the US and if they are may need to be declared and/or require treaty-related documentation. This includes interest earned by a Canadian instrument in Canada while you are living in the US.
posted by suetanvil at 12:11 PM on December 21, 2018 [1 favorite]


Best answer: In my experience, ask.me is not very good for tax or financial planning advice.

The Serbinski Accounting Forums are *the* place on the Internet for information about US/Canada cross-border taxes. And while I've never used them, I assume that Serbinski Accounting probably knows their shit when it comes to US/Canada cross-border tax prep.
posted by phoenixy at 12:57 PM on December 21, 2018


So as everyone else says get an accountant. That said, I don't have a recommendation because I've never used one*. I'm a Canadian who has lived & worked in the US for the last 10 years. I will give you my experience. It is not comprehensive advice.

If you completely divest yourself from any Canadian financial ties beyond a CAD bank account then it's not that complex. You file a final tax return in Canada and say you're leaving and you start filing in the US. Doing your taxes online isn't that hard if you don't have any huge complications. If you retain a house in Canada or have Canadian income or any of a number of other things then you're in a dual filing situation and it's complex and you'll need an accountant.

If you retain savings accounts in Canada you probably have to file a FBAR declaration. Although as of 2017 it doesn't apply to RRSPs. Again, this is a good question to ask your advisor. If they don't have an answer they may not really know what's going on.

- do I contribute to 401k or child education savings while I'm here?

So there's no simple answer here. You can. You should save something for retirement. You can't contribute to a RRSP or TFSA while living & working in the US. 401k's are covered under the US-Canada tax treaty so as long as you don't try to withdraw before you retire it's not complex. If you'll really only be here a few years (everyone says that and most end up staying longer) then there's a tradeoff with complexity. You can withdraw early with a penalty which may or may not be worth it.

The US 529 plan system (child education savings) varies state by state and depending where you live there may be no tax advantage to it.

- cost benefit analysis rent vs buy (I have no clue how this mortgage interest deduction works)

Rent vs buy is complex. If you're really only staying 3-5 years, probably rent. But interest deduction is simple via tax packages. I think it's not that big a factor vs your local real estate market and where prices are going.

- can I send money back to myself in Canada while the exchange rate is low?

Sure. Just make sure to file a the proper forms if the account is over the reporting threshold.

* if you basically abandon Canada and become a pretend American with a green card you mostly ignore all the cross-border issues and just can take advice from all-American sources. if this is not you, get a cross-border accountant.
posted by GuyZero at 1:34 PM on December 21, 2018 [1 favorite]


« Older Resources that demystify (fiction) writing   |   Pagans vs Papers. Who's right? Newer »
This thread is closed to new comments.