# Changing provinces for tax savings



## Dave (Apr 5, 2009)

I am in the unfortunate position of being a resident of Quebec right now and the currently elected party wants to increase the highest individual tax bracket by another 5% that will be retroactive starting in January 2012. Since I am in the highest tax bracket with a very high personnal income this year, I am seriously considering taking a year off and moving to Alberta right now just so I do not have deal with this mess. The difference in taxes that I would have to pay for 2012 between the two provinces will be over 100K if this project of the PQ is approved. A mind blowing number, I know. Just making that calculation made me realize how insane and frustrating it is that they want to increase taxes again in the most taxed province. 

What would be your tipping point in tax savings to make you move under the best circumstances (note: I am single and my field of employement is very mobile) ? 
How much time do you have to be at the new address before december 2012 to make sure this is legal ? 

Dave


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## MoneyGal (Apr 24, 2009)

You have to be "ordinarily resident" in the new province. Generally this means severing your residential ties with the old province.


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## davext (Apr 11, 2010)

I'd leave too. 

If it were not for family living in Ontario, I'd leave Ontario to go to Alberta for for cheaper housing prices and potential for growth.


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## Dave (Apr 5, 2009)

MoneyGal said:


> You have to be "ordinarily resident" in the new province.


Does that mean cancelling my provincial health insurance, changing address with gov agencies, etc ? 

Dave


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## Square Root (Jan 30, 2010)

[SUB][/SUB]


Dave said:


> Does that mean cancelling my provincial health insurance, changing address with gov agencies, etc ?
> 
> Dave


There is no proscribed methodology, but obviously you would do that at least. Residency is a matter of fact, ie they consider a number of possible factors such as employment, family, registration of auto, health care, real estate, etc. There is an IT bulletin on this so go to the CRA website, but it is mostly common sense. To be safe you should do everything you can think of including, registering autos, selling any real estate in Quebec( or at least not spending time in it) buying or renting a place in Alberta, getting Alberta healh care ,Alberta drivers license. Maybe getting a job in Alberta,etc. It is a huge tax savings, I know. The max marg rate would be over 10% lower in Alberta and the max rate on dividends even more of a difference. It always surprises me that more people with transferable lives don't come to Alberta. Think about Canmore as place to live if you are the least bit active or enjoy he outdoors. Good luck.


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## OhGreatGuru (May 24, 2009)

Dave said:


> .. the currently elected party wants to increase the highest individual tax bracket by another 5% that will be retroactive starting in January 2012. .... The difference in taxes that I would have to pay for 2012 between the two provinces will be over 100K if this project of the PQ is approved.
> 
> Dave


I sympathize with your concerns about Quebec's tax regime. But perhaps you should take a small portion of your reputed multi-million dollar income and hire a tax specialist for advice.


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## Dave (Apr 5, 2009)

Thanks a lot Square Root. I need the encouragement to make sure that I am not indeed crazy to think this way. However, once the highest marginal taxation rate in Qc exceeds 50%, I know that this will be my tipping point. I.e. why wake up in mourning and work my *** off for endless hours to give more that the half of my earings to the governement ? I might just as well scale back or even take a break for a while, but have the satisfaction that more stays in my pocket. They even plan to increase taxes on eligible canadian dividends, which is a big part of my current investment and retirement planning. Very depressing. You are punished form all sides.

I know that many people work in Quebec and live in Ontario and vice versa in the Hull / Gatineau area, so it should even be feasable to keep a part time position in my current work place if it is required by my organisation. I am looking into the details right now and any advice on would be appreciated.

Dave


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## Dave (Apr 5, 2009)

OhGreatGuru, my income is not THAT high, I wish though...  but if you are in the six figures, the taxes will get sky high with the additional 5% that they are planning to add. I will be meeting my accountant on that matter, but to be very honest, I am somehow embarassed to discuss that with him. Deep down, the non rational part of me is afraid that he'll think that I am crazy/way too greedy. That's why I wanted to get some opinions here just to get a feel ... call it the psychology of finance.

Dave


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## brad (May 22, 2009)

Dave said:


> I.e. why wake up in mourning and work my *** off for endless hours to give more that the half of my earings to the governement ?


Keep in mind that the marginal tax rate and your actual tax rate are two very different things. When I first moved to Québec about 10 years ago, my marginal tax rate was 52% (combined federal and provincial) but my actual tax rate was something like 32%. Of course, the more you earn over the tax bracket cutoff, the more of your total earnings will be taxed at the highest marginal rate.

Also keep in mind that the new tax structure is still very much in the proposal stage. I suppose if it worries you it's a good idea to research your options, as you're doing, but the proposal could easily end up going nowhere. There's a lot of opposition to it. We'll see.


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## Four Pillars (Apr 5, 2009)

Dave said:


> OhGreatGuru, my income is not THAT high, I wish though...  but if you are in the six figures, the taxes will get sky high with the additional 5% that they are planning to add. I will be meeting my accountant on that matter, but to be very honest, I am somehow embarassed to discuss that with him. Deep down, the non rational part of me is afraid that he'll think that I am crazy/way too greedy. That's why I wanted to get some opinions here just to get a feel ... call it the psychology of finance.
> 
> Dave


If the difference in tax paid between two provinces is $100,000 - you must have a very high income. In your situation is it worthwhile to move all the way across the country for $100k per year?

My suggestion is to talk to a tax person (of some type) and verify your numbers and at least make sure you are basing your decision on the facts.


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## Square Root (Jan 30, 2010)

i assume Dave knows how to calculate total tax owing and knows the diff between total tax and maximum marginal tax rate. To save 100k per year he would need about $1million in gross earnings assuming taxed as regular income. 
I wouldn't consider Ontario much of a tax haven with the new "surtax" on incomes over $500k now in effect. Ont's max marg rate is very close to 50% the max marg rate on divs is over 30% I think. Alberta's comparable rate is 39% and 19%. Not to mention no sales tax in Alberta. ........Alberta bound anyone?
edit: Actually with he facts now in my possession, it looks more like $750k or so in gross income to save $100k per year by moving to Alberta. This is likely unsustainable and highly unlikely to happen IMHO. Whatever does transpire will still be awful.


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## brad (May 22, 2009)

A compromise is already in the works.

FYI, the rationale behind all this is that the PQ wants to eliminate the flat $200 health tax levied on everyone (rich and poor alike) in Québec. That leaves a revenue shortfall, which they have to compensate for somehow or else reduce services. We'll see what they come up with.


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## Square Root (Jan 30, 2010)

The story in the G&M this AM implies they want to raise the rate by 7% points. This is hard to believe as it will take the max marg rate to around 55-56% for those earning more than $250k. Surely this is much more than the health care levy? Truly awful policy. Kind of what you expect from these guys though.
Edit: Actually it's 60% max marg rate! Incredible.


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## brad (May 22, 2009)

The Québec marginal rate they proposed would be 28% for people earning more than $130K and 31% for those earning more than $250K.

But as I said above, that's old news now. According to La Presse this morning, a compromise is already being discussed.


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## Square Root (Jan 30, 2010)

brad said:


> The Québec marginal rate they proposed would be 28% for people earning more than $130K and 31% for those earning more than $250K.
> 
> But as I said above, that's old news now. According to La Presse this morning, a compromise is already being discussed.


That's the provincial rate. Need to add on the federal rate(I think you still pay federal taxes in la belle province?) The max federal rate is 29% . That takes it to 60% Vs 39% in Wild Rose Country. Put another way, I pay 10% flat provincial tax to Alberta and they want high earners in Quebec to pay 31% at the margin!! OMG That can't be right. Compromise indeed.


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## brad (May 22, 2009)

Square Root said:


> That's the provincial rate. Need to add on the federal rate


Sorry I assumed that goes without saying. Yes, it's high, but hey, we get to live in Québec. You'd have to quintuple my salary or maybe tax me at 100% to get me to move anywhere else in Canada ;-) Although I would consider Newfoundland...it's just a little far from all my friends and family.


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## Four Pillars (Apr 5, 2009)

Square Root said:


> i assume Dave knows how to calculate total tax owing and knows the diff between total tax and maximum marginal tax rate.


Never assume....


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## kcowan (Jul 1, 2010)

Dave
Don't forget to factor in the higher costs of housing in Alta. Esp Calgary and Canmore.
Keith


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## Square Root (Jan 30, 2010)

kcowan said:


> Dave
> Don't forget to factor in the higher costs of housing in Alta. Esp Calgary and Canmore.
> Keith


Agree if you buy, but a year or two of renting can be easily financd with $100k per year. He might even like it. I do.


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## Charlie (May 20, 2011)

Just a note....if it's professional income (self employed), rather than salary income, it's taxed in the province earned -- regardless of where you reside on Dec 31. If you move to Alberta in December, 11/12 of that income would generally still be subject to Quebec rates. And have you been to Alberta in December ??? brrrrrrrrrrrrrrr!

But basically, you have to move. Sell your PQ house, acquire one (or long term lease) in Alberta, move the kids, establish ties etc.


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## Square Root (Jan 30, 2010)

Good point about self employed income. Dave would have to ensure this wasn't a problem. Have you ever skied in banff/Lake Louise in Dec ? Fantasticc.


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## brad (May 22, 2009)

As expected, the PQ backed down on this and they're now coming up with an alternative plan where the combined marginal federal-provincial rate at the highest income bracket would only be slightly higher than that in Ontario; the heath tax won't be abolished but would be implemented on a sliding scale (highest earners would pay $900 instead of $200). Still plenty of negotiations ahead, and these are early days...we'll see how it all shakes out.


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## Square Root (Jan 30, 2010)

The Quebec max marg combined rate will still be high-in the low 50% range? Still outrageous when compared to good ol' Alberta.


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