This article was first published on June 12, 2012. It was updated on June 18, 2013, with information relevant to the 2012 and 2013 tax years.
How Working in Canada Impacts Your US Expat Taxes
American citizens are obligated to file US expat taxes with the federal government each year. This is true even if you are living north of the border! In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts. While the US is one of the few governments that taxes the international income of its citizens and permanent residents, it does have provisions to protect us from double taxation. These include the Foreign Earned Income Exclusion, Foreign Tax Credit, and Foreign Housing Exclusion.
If you are an American living in Canada, you need to know how this will impact your US expat taxes. You will likely be required to file and pay taxes to the Canadian Revenue Service. Living and working in Canada could alter your contributions to Social Security. It also may impact your eligibility for Old Age Security and the Canada Pension Plan. This short video will provide you with a glimpse of how being an American living in Canada will impact your US expat taxes. More detailed information can also be found in our Country-Specific Guide to Canada; click here to read it.
US Expat Taxes in Canada
Do I need to file taxes if I’m living in Canada?
Yes! US citizens are required to file and pay US expat taxes on worldwide income. It does not matter if you have already paid taxes in Canada. You still must file US expat taxes.
First, let’s start with your Canadian filing requirements!
What rates can I expect in Canada as a resident?
Taxable income in Canadian dollars — 2013 Tax Rate
First $43,561 — 15%
Next $43,562 — 22%
Next $47,931 — 26%
Any income over $135,054 — 29%
Who is a resident of Canada?
The Canada Revenue Agency determines residency on whether you:
- Own a home in Canada
- Have a spouse/common law partner in Canada
- Have children in Canada
- Have personal property in Canada
- Have other social and economic ties to Canada
Also, anyone who is in Canada for more than 183 days in a year may be considered a resident for tax purposes.
Is foreign income taxed in Canada?
- If you are a resident of Canada, you are going to be taxed on worldwide income.
- Non-residents must report only Canada-earned income.
Canadian tax year and due date
- Canada tax year – January 1 through December 31 – makes filing your US expat taxes easier because you do not need to pro-rate your income!
- Canada tax due date – most people need to file their T1 (Canadian tax form) by April 30.
- Remember: You will need to complete your Canadian taxes in order to complete your US expat taxes!
Canadian Social Security
The US and Canada have a totalization agreement:
- If you pay Canadian Social Security, you do not pay US Social Security.
- The same holds true for Canadians living in the US.
- Canada also has pension plans (Old Age Security and Canada Pension Plan) that you cannot access these funds until age 65.
More about taxes in Canada
- Sales tax is levied at the provincial level – the federal level is 5%, and each province adds between 0% and 10%.
- Severing residency is also a taxable event – you must pay capital gains on the fair market value of any assets you liquidate when you leave.
Now, let’s move on to your US filing requirements!
US expat tax year and due dates
2012 Tax year – January 1 through December 31
- April 15, 2013 – although expats get an automatic extension until June 15, if you owe any taxes, interest accrues starting April 15.
- June 17, 2013 – the US expat tax due date. Unless you’ve filed for an extension, you must file your expat taxes by this date.
- June 30, 2013 – FBAR (Foreign Bank Account Reporting) form due to the US Department of Treasury.
- October 15, 2013 – last due date for US expat taxes (if you filed for an extension).
2013 Tax year – January 1 through December 31
- April 15, 2014 – although expats get an automatic extension until June 15, if you owe any taxes, interest accrues starting April 15.
- June 16, 2014 – the US expat tax due date. Unless you’ve filed for an extension, you must file your expat taxes by this date.
- June 30, 2014 – FBAR (Foreign Bank Account Reporting) form due to the US Department of Treasury.
- October 15, 2014 – last due date for US expat taxes (if you filed for an extension).
US expat tax obligations
The US requires you to report your worldwide income on your tax return. All income is subject to taxation. However, the US has a number of provisions to help prevent double taxation. These include:
- The Foreign Earned Income Exclusion, which allows you to exclude up to $95,100 of foreign-earned income from your 2012 US taxes and up to $97,600 from your 2013 US taxes,
- The Foreign Tax Credit, which allows you to offset the taxes you paid to Canada with your US expat taxes, dollar-for-dollar, and
- The Foreign Housing Exclusion, which allows you to exclude certain household expenses that occur as a result of your living abroad.
We offer resources and services to help you:
- Learn more about how your US expat taxes are impacted when you live and work in Canada by reading our Country-Specific Guide to Canada.
- File amended tax returns and forms easily, accurately, and in a timely manner.
Need Help With US Expat Taxes in Canada?
Discover more ideas on how to limit your tax liability by following Expatriate Tax Return Savings Tips on our website. If you have any more questions about your US expat taxes and their implications in Canada, or if you’d like to learn more about our expat tax services, please contact us.
Copyright Greenback Expat Tax Services June 12, 2012, Updated June 18, 2013