What Should you Know About US Expat Taxes if Living and Working in Canada

What Should you Know About US Expat Taxes if Living and Working in Canada

Both Americans and green card holders living in Canada must file a US expat tax return each year. If you are a US citizen, you have to go for US tax filing irrespective of where you live. This means you are taxed on all your income such as income from salary, wages, interest, rental properties or dividends.

Let's know how living and earning in Canada will affect your US expat taxes!

You have to find and pay taxes to the Canadian revenue service. Working in Canada could alter your contributions to social security and may affect your eligibility for old age security and Canada pension plan.

Most of the US citizens and green card holders who are working and living in Canada have a common question that is "Am I required to file US taxes in Canada? The answer is YES. You are required to file US taxes in Canada on your worldwide income. No matter if you have already paid taxes in Canada, you have to file US expat taxes.

Wha t are Can adia n tax rate s?

Federal Income Tax Rates in Canada for 2021: • 15% on the first $49,020 of taxable income • 20.5% on the next over $49,020 up to $98,040 • 26% on the next over $98,040 up to $151,978 • 29% on the next over $151,978 up to $216,511 • 33% of taxable income over $216,511 The deadline of tax filing for US citizens living abroad is 15 June 2021.

What are US tax penalties?

US tax penalties are steep and can result in big fines even a revoked passport or jail time too. If anyone tempered to skip filing his or her taxes or additional financial reporting, he or she will pay the price later. Canada complies with FATCA reporting that means Canada and the US can

exchange information about a person's financial accounts. So, it is worth it to have a US or Canada tax expert go through your documents to ensure you are reporting the correct amount.

How can you reduce your tax bill or avoid dual taxation?

If you are worried about double taxation between the US and Canada, then you can relax. This is because US citizens living and working in Canada can take advantage of 1 or 2 options to lower their taxes. These options are: •

The foreign earned income exclusion and housing exclusion

The FEIE and housing exclusion lets you exclude up to a certain amount of foreign earned income if you meet certain requirements.

•

Foreign tax credit

It lets Americans living in Canada claim a dollar for dollar credit on Canadian taxes paid if they meet certain requirements.

Reme mber, Canadian tax free investments are taxable in the United States. If you own a Canadian tax free savings account, registered education savings plan or registered disability savings plan, then your contributions can grow tax free as far as the Canadian taxes are concerned. But, your earnings are subject to US taxes and you may have to report your account as an overseas grantor.