Taxes for US Citizens Living and Working in Canada
As a US citizen living and working in Canada, you will have to pay taxes to the Canadian government and file US taxes since the US taxes all citizens regardless of where they live.
Canada at a Glance
- Primary Tax Form for Residents: Form T1
- Tax Year: January 1st to December 31st.
- Tax Deadline: April 30th
- Currency: Canadian dollar (CAD).
- Population: 41 million (as of 2024)
- Number of US Expats: Estimated 1 million US citizens living in Canada
- Capital City: Ottawa, Ontario.
- Primary Language: English and French
- Tax Treaty: Yes
- Totalization Agreement: Yes
What US Citizens Living in Canada Should Know About US Taxes
Working in Canada Can Impact Your Taxes (Even If You Don’t Stay Long)
If you’re living and working in Canada, you may be considered a tax resident of Canada. If so, you will be subject to income tax in Canada based on your global income. You will also need to file a Canadian tax return each year, regardless of your income.
You May Need to Report Your Canadian Assets and Bank Accounts
US expats in Canada must report their foreign assets to the IRS each year, including bank accounts, investments, and certain assets. The IRS does this to keep US citizens from “hiding” money in other countries. The good news is that these forms won’t require you to pay any additional taxes — they are purely for informational purposes.
US Tax Penalties Can Be Steep — from Fines to Jail Time
Failing to file a US tax return or other tax forms when required can lead to serious penalties. In most cases, this will mean a fine. However, in cases of intentional failure to file, you could also lose your passport or even face jail time.
If you’re behind on your expat taxes, you can get caught up without the usual penalties by using the Streamlined Filing Compliance Procedures.
You Can Lower Your US Bill with Various Expat Tax Benefits
The Foreign Tax Credit can help many American expats living in Canada avoid double taxation. The IRS also provides several other potential tax benefits for expats, such as:
This comprehensive guide is filled with valuable insights and tools to help you confidently explore the realm of global property investment.
What US Citizens Retiring in Canada Should Know About US Taxes
Many Americans choose to spend their golden years in Canada. Here are some handy tips worth knowing when you retire in Canada.
Canadian Tax-Free Investments Are Not Tax-Free in the US
Certain Canadian tax-free investments, such as a Tax-Free Savings Account (TFSA) and Registered Education Savings Plan (RESP), are not tax-free under US tax law. The IRS considers income from TFSAs and RESPs as taxable, and these accounts are treated as foreign trusts. You will have to report these investments, and you may have to pay additional taxes.
Your Canadian Pension and Retirement Account Earnings May Receive Special Tax Treatment
US citizens living in Canada can get special tax treatment on Canadian pension and retirement accounts, such as the Registered Retirement Savings Plan (RRSP) and the Canada Pension Plan (CPP). The US-Canada tax treaty lets you defer US taxes on RRSP and Registered Retirement Income Fund (RRIF) earnings until the funds are withdrawn as long as you make the proper election with the IRS.
You May Need to Report Your Canadian Retirement Income to the IRS
US citizens living in Canada are required to report their worldwide income, including Canadian retirement and pension income, on their US tax return. While the Canada-US tax treaty provides some relief, such as allowing for tax deferral on RRSP earnings until withdrawal, these amounts still need to be reported to the IRS. Failure to report this income can lead to penalties and interest.
Taxes for US-Canada Commuters
US-Canada commuters (those who live in one country and work in the other) may have to navigate complex tax rules from both countries. Generally, US citizens and residents must report their worldwide income, including wages earned in Canada, on their US tax return. You will also have to report any income earned in Canada on a Canadian return. Depending on what state you live in, state taxes may also apply.
Essentials of Canada Taxes for US Citizens
Who Qualifies as a Resident of Canada?
In Canada, residency status is determined by dwelling, spouse, and dependents. First and foremost, residents have a fixed abode for themselves in Canada. But other factors can also come into play regarding residency status as well, such as work and social ties. Finally, anyone who spends at least 183 days in Canada during a single year is considered a resident, even if they don’t meet any other qualifications.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
Canada Has Progressive Income Tax Rates
In Canada, federal tax rates for 2023 are as follows:
- 15% on taxable income up to $53,359.
- 20.5% on the portion of taxable income over $53,359 up to $106,717.
- 26% on the portion over $106,717 up to $165,430.
- 29% on the portion over $165,430 up to $235,675.
- 33% on the portion of taxable income over $235,675
Canadian Federal Income Tax Rates in 2024 (2023 tax year)
| Income in CAD | Tax Rate |
| up to $53,359 | 15% |
| $53,359 up to $106,717 | 20.5% on the portion of taxable income of the excess over $53,359 |
| $106,717 up to $165,430 | 26% on the portion of taxable income of the excess over $106,717 |
| $165,430 up to $235,675 | 29% on the portion of taxable income of the excess over $165,430 |
| Over $235,675 | 33% on the portion of taxable income of the excess over $235,675 |
Provincial Tax Rates
Canada has provincial and territorial taxes that are typically progressive and vary widely. For example, in British Columbia, the rates range from 5.06% on income up to CAD $45,654 to 20.5% on income over CAD $240,716. In Ontario, the rates range from 5.05% for income up to CAD $51,446, to 13.16% for income over CAD $220,000. And in Quebec, the rates range from 14% for income up to CAD $51,780, to 25.75% for income over CAD $126,000
Canada vs. US Tax Season Differences
Canada uses the same calendar for the tax year as the US: January 1 to December 31. In Canada, the tax filing deadline is April 30, with an extension to June 15 for self-employed individuals. (Though any owed taxes must be paid by April 30.)
How Greenback Can Help Americans Living in Canada with Taxes
We hope this guide has helped you understand more about your taxes as a US citizen living in Canada. If you still have questions, we have the answers!
Contact us, and one of our customer champions will gladly help. If you need precise advice on your tax situation, you can also click below to get a consultation with one of our expat tax experts.
