Expat taxes in Canada
As an American or green card holder living in Canada, filing two sets of taxes can feel a little overwhelming. Knowing which tax rules affect you and understanding your options is a lot to stay on top of.
With H&R Block, you can rest easy knowing you’ve found the right expertise for your U.S. expat taxes in Canada — and for your Canadian tax return. We make it easy to get your taxes from both sides of the border done all in one place, so you can get back to what matters to you.
What Americans living in Canada should know
For starters, Americans and U.S. green card holders living in Canada should continue to file a U.S. tax return each year. However, filing while abroad comes with new considerations and questions. “Do I have additional information to report to the IRS? How do my Canadian financial accounts affect my filing? What options do I have to reduce my tax bill?”
We’ve outlined a few considerations for U.S. expat taxes in Canada, so you know what affects the tax you pay which forms you need to file. Of course, tax rules for U.S. expats go beyond what we’ve listed below.
Need help? With H&R Block’s cross-border tax services, you’ll get expert tax guidance with a comprehensive view of your taxes and the convenience of working with one company.
U.S. Expat Tax Filing Considerations
Working as a U.S. citizen in Canada can affect your taxes even if you don’t stay long. For example, if you earn income while on a short-term assignment, you’ll need to report that income on your U.S. taxes. As you establish deeper financial roots in Canada, you’ll have more considerations for your American tax filing.
You may need to report your Canadian financial accounts and assets. Generally, U.S. taxpayers with more than $10,000 in foreign bank or financial accounts are subject to FBAR filing and reporting requirements. You may also be subject to FATCA reporting requirements if you have foreign assets valued at $200,000 and higher.
You can lower your U.S. bill and avoid dual taxation with certain tax strategies. Expats may take advantage of one of two options, detailed below, to lower their taxes.
- The foreign earned income exclusion allows you to exclude your wages from your U.S. taxes. This option is available to those who meet certain time-based residency requirements.
- The foreign tax credit lets you claim a credit for income taxes paid to a foreign government.
Canadian tax-free investments are not tax-free in the United States. If you own a Canadian Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP), or Registered Disability Savings Plan (RDSP), your contributions can grow tax-free as far as your Canadian taxes are concerned. However, your earnings are subject to U.S. taxes, and you may need to report your account as a foreign grantor trust.
Your Canadian pension can get special treatment. Thanks to the U.S. - Canada tax treaty, any benefits paid to the Canada Pension Plans (CPP), Quebec Pension Plan (QPP) and Old Age Security (OAS) pension programs are treated as U.S. Social Security benefits for U.S. tax purposes. If your total income is above a certain limit, a maximum of 85% of your benefits may be taxable.
You will need to report your Canadian pension benefits on Form 1040. Working with H&R Block means you can rest easy that your benefits are reported correctly, so you don’t pay more tax than needed. Plus, you’ll only need to provide your pension information once.
Your Canadian retirement account earnings can be eligible for special treatment. Another provision of the U.S. - Canada tax treaty allows you to defer U.S. tax on undistributed earnings from a Canadian Registered Retirement Savings Plan (RRSP) or Canadian Registered Retirement Income Fund (RRIF) in certain situations. However, the RRSP and RRIF are still subject to FBAR and FATCA reporting.
Your H&R Block tax advisor can help you determine if your earnings can be deferred and the appropriate reporting for your U.S. and Canadian taxes.
Canadian Tax Filing Considerations
Your Canadian income taxes are based on your residency status. Generally, you’re considered a Canadian resident if you maintain residential, social, and economic ties in Canada or if you stay in Canada more than 183 days.
- Canadian tax residents are taxed on all income, regardless of where it’s earned.
- Nonresidents are taxed on income from employment, business in Canada, investments in Canada and/or capital gains from the sale of a Canadian property.
The federal income tax rates range from 15% to 33%. Similar to taxes in the U.S., the percentage of tax that you pay increases as your income increases into different brackets. Depending on their tax bracket, some Americans would pay higher income tax rates locally than in the U.S.
With this in mind, it may be better for some U.S. taxpayers to use the foreign tax credit vs. the foreign earned income exclusion. However, if all income can be excluded using the foreign earned income exclusion or a special treaty benefit applies to the income these may be more beneficial to some Americans. One of our experienced tax advisors can help determine the best choice for your situation.
2019-2020 tax rates
|Tax Rate||Taxable income|
|20.5%||C$7,145 plus 20.5% of C$47,631 - C$95,259|
|26%||C$16,909 plus 26% of C$95,260 - C$147,667|
|29%||C$30,535 plus 29% of C$147,668 - C$210,371|
|33%||C$48,719 plus 33% of C$210,372 and up|
Note the first 12,069 CAD or below for 2019 is not taxed (similar to the U.S. standard deduction). Additionally, U.S. expats are subject to provincial and territory taxes, which range from 11.55% to 25.75%.
The tax filing season is similar to the U.S. tax year, but with a few differences. Canadian taxes follow a January to December tax year. Tax returns are due on April 30 for individuals and June 15 for self-employed taxpayers. In general, no extensions are allowed.
How H&R Block can help expats in Canada
Our highly trained experts have helped thousands of Americans as they file their U.S. expat and Canadian taxes in Canada. You can trust our expertise and guidance to help you determine the best tax strategies for your American and Canadian taxes --- all in one place.
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