# Moving to Canada - US vs Canadian Income Tax



## shirishnayna

Newbie here - great forum for getting acquainted on all things financial in Canada.

As a result of my employer relocating to Canada, I will be moving to Canada in late 2011 or 2012. In negotiations with my employer, I want to be able to estimate the impact from a taxation perspective. Does anyone know of any tax calculators that compare US and Canada income taxes? Thanks in advance for your help on this.


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## allgood

You can estimate your Canadian taxes at www.taxtips.ca.


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## Karen

You may want to get hold of a book called _The American in Canada: Real-Life Tax and Financial Insights into Moving to and Living in Canada_ by Brian D. Wruk and Terry F. Ritchie. My late husband moved here from the USA, and we found this book very helpful. I don't know whether it's available in most bookstores, but we ordered ours from Amazon.com.


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## OhGreatGuru

You may be shocked at our income tax levels compared to the US, but remember we are getting public health care for it; our provinces provide much better support for the public school system than many states do; and university tuition is still far less then in the US. (Mind you the cost of just about everything else is higher for a variety of reasons.)


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## OhGreatGuru

shirishnayna said:


> ...
> 
> As a result of my employer relocating to Canada, I will be moving to Canada in late 2011 or 2012. ...


PS. Not to miss the obvious, but are you Canadian? Will you be even eligible to work here?


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## fraser

Even though we live in Alberta and enjoy the lowest tax rate (at out income level) in the country and no provinical sales taxes, Americans that we speak to are always amazed at out top marginal rate of 39%

Likewise, we are always amazed at what those same Americans are paying for medical insurance and we have heard some horrific stories of people loosing their entire net worth due to medical expenses after loosing their jobs in their early-late fifties.

I think that where you are in you lifecycle will play a part in the comparison. Having said that, we certainly have more than our fair share of hidden taxes, user fees, etc. in Canada.


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## I'm Howard

U.S Health Insurance always has a limit to how much they will pay, so even if you have Insurance, if you get a catastrophic illness it is quite possible for your Insurance to run out and for you to have tp pay expenses from your own personal savings.

Personal experiance with U.S freinds who got Ca and , after Insurance ran out, were forced to sell their home.

Rich neighbourhoods get well financed schools, poorer ones do not. 

U.S Teachers salivate when i tell them what Canadian Teachers earn and their pension beenfits, many of them are lucky to be making $40k.


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## financialnoob

Just to add on to the discussion on catastrophic healthcare costs for Americans, this article shows 62% of bankruptcies are due to medical bills:

Medical bills prompt more than 60 percent of U.S. bankruptcies



> This year, an estimated 1.5 million Americans will declare bankruptcy. Many people may chalk up that misfortune to overspending or a lavish lifestyle, but a new study suggests that more than 60 percent of people who go bankrupt are actually capsized by medical bills.
> 
> Bankruptcies due to medical bills increased by nearly 50 percent in a six-year period, from 46 percent in 2001 to 62 percent in 2007, and most of those who filed for bankruptcy were middle-class, well-educated homeowners, according to a report that will be published in the August issue of The American Journal of Medicine.
> 
> "Unless you're a Warren Buffett or Bill Gates, you're one illness away from financial ruin in this country," says lead author Steffie Woolhandler, M.D., of the Harvard Medical School, in Cambridge, Mass. "If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that's the major finding in our study."


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## andrewf

I'm not convinced that taxes are substantially higher in Canada when you factor in federal, state and sometimes local income taxes, as well as often quite high property taxes. It varies quite a lot from state to state.

Once you factor in health care and that our state pension system isn't bankrupt...


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## Karen

You're correct, Andrew, according to the late David Ingram, a noted expert in US-Canadian taxes who prepared my late American husband's tax returns. David told us that it's a myth that Canadian taxes are always higher than American. Bill moved here from Alaska, where there is no state income tax, so he paid more taxes here in Canada, but apparently that wouldn't necessarily have been true if he had been from a high tax state such as California or New York.


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## Calgary_Girl

I have to agree with Andrew and Karen.

I am Canadian but my husband is American and we lived in the States together for a couple of years before moving back to Canada. At the end of day, when all the taxes were taken and deductions made, our after-tax income in the States was the same as it is in Canada.

Yes, some things are cheaper (depending on the area that you live in in the States) such as housing and goods but other things are more expensive. I was tired of getting nickle-and-dimed to death in the States for every visit that I made to the doctor and for every prescription that was filled. Dealing with a hospital visit is a nightmare with all of the forms, copays and insurance companies to deal with.

In Canada, we have better health benefits (although most Americans that I met wouldn't agree to that). They refer to our healthcare system as "socialist" but I bet most would be happy with a "socialist" system if they lost their jobs or went bankrupt due to a medical emergency . Most of my American girl friends can't believe that we have 1 year Maternity Leave in Canada...in the States you get 12 weeks if you're lucky and work for a large company.

I recommend getting a good cross-border tax accountant since you will need to file dual income tax returns.


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## kcowan

Plus their biggest challenge is to get to 65 and qualify for their own socialist medicare.

We did a study between NY Westchester county and Toronto in the 80s for similar jobs and concluded that the disposable income was double in the US. But this was for two 35 yo so medical did not play a part. This disposable was used to pay education property tax in Westchester county among other things.


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## Charlie

to echo previous comments, depending where you're coming from in the US, and your income and family situation, you might even face lower taxes. A few yrs ago I did a comparison between BC and California. The BC employee took home more until income got to about $120K. 

I think that even excluded medical. This was for a single person who did not itemize. Payroll taxes are lower in Canada. Property taxes were also significantly lower. (though gas, booze and other expenses were much higher).

You can calculate your cdn fed, provincial and payroll withholds here: http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/pdoc-eng.html

You'll also be subject to Medical Services Premiums, (or possibly paid by your employer). About $120/mo for a family of four in BC.


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## Eclectic12

andrewf said:


> I'm not convinced that taxes are substantially higher in Canada when you factor in federal, state and sometimes local income taxes, as well as often quite high property taxes. It varies quite a lot from state to state.
> 
> Once you factor in health care and that our state pension system isn't bankrupt...


+1 ... I can remember one of the Canadians who moved to California writing a letter to the editor of the Globe and Mail in 1998 or so.

His comment was that once he factored in all of the costs, he figured it was was pretty much the same lifestyle as Toronto. The only reason he was staying in Califorinia was that for his job, if he wanted to switch companies, California offered 6,000+ possibilities where Toronto offer 10.

The wife of a doctor who moved to Texas said pretty much the same thing. The factor that had them staying was that most of her family was in Texas where he had almost nobody in Canada.


Cheers


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## realist

andrewf said:


> Once you factor in health care and that our state pension system isn't bankrupt...


Yet...


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## MoneyGal

Only super-perma-bears remain pessimistic about the long-term solvency of the CPP. 

We don't use a PAYGO system (as does the U.S. in large part), we use a "steady state" funding formula that is projected to allow current contribution rates to remain stable and the pool to remain funded for the next 75 years. 

You can read the reports from the CPP's chief actuary here: 

http://www.cppib.ca/Publications/other_reports.html

and a special report on the adequacy of the current arrangements here: 

http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=1777

The chief actuary's reports are reviewed by an independent panel which is world-renowned for their expertise. You can read more about the most recent external review of the most recent chief actuary's report here: 

http://www.benefitscanada.com/news/chief-actuary-releases-cpp-review-panel-findings-16583

People in the U.S. have good reason to be worried about the long-term future of their public social security systems. People in Canada do not. If you are really interested in this topic, there's a book-length study on how the future of the CPP was secured: http://books.google.com/books/about/Fixing_the_future.html?id=jIXcHG685SkC


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## fraser

I am not certain exactly where people get the notion that CPP is poorly funded or that it will run out of money. 

As others have said, this could not be further from the truth. If fact, I recall reading that the CPP ranks in the top ten of such plans based on money management actuarial estimates, etc.


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## MoneyGal

Once upon a time, before the process outlined in Fixing the Future (the book to which I linked above), people did have reason to be worried about the long-term solvency of the CPP. 

Here's a blurb about the book which provides some context:

_In 1993, most Canadians believed that big government deficits were permanent and that the Canada Pension Plan (CPP) was in such deep trouble that younger Canadians would never collect a retirement pension. They believed too that Canada's politicians were incapable of dealing with either problem. 

Yet by 1998, both were essentially solved.

While the deficit battles have been recounted many times, the story of the reform that rescued the CPP has gone almost entirely untold. In Fixing the Future , Bruce Little explains the CPP overhaul and shows why it stands as one of Canada's most significant public policy success stories, in part because it demanded an almost unparalleled degree of federal-provincial co-operation. 

Providing an overview of the CPP's entire history from its beginning in 1965, Little pulls together published, and new unpublished, material relating to the CPP reform, and interviews over fifty politicians, government officials, and others who were deeply involved in the reforms for their recollections, insights, and observations.

A superbly-told history of one of Canada's most important public policy issues, Fixing the Future will be of interest to political scientists, historians, economists, and anyone concerned about their retirement._

So if you haven't kept up to date on the future of the CPP for the last 18 years, you might still be worried about it.


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## I'm Howard

The major differances between the two countries is that in the U.S you get your monies and you make the decisions on how to spend it, including Health Care.

The vast majority of Americans without Health Coverage are young.

You may pay less in income Tax but Property Taxes can be higher, and the better the neighbourhood School, the more Property Taxes you pay.

Desegregation was more about people paying little for Property Taxes forcing themselves into Schools that were better because it was a higher taxed neighbourhood.

The Year Maternity really pi$%es me off, if you want a Child, wonderful, but why should those who choose not too subsidise you through their Unemployment Premiums.??

Taxation in Canada pulls everyone down to the norm, decisions are made for you, you have no say, the money is taken.

Protests this week from people who failed to take Disability Insurance, have become disabled, now are demanding Tax Payers compensate for their decision not to buy it.


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