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\r\n\t\t\t\r\n\t\t\t\tUnderstand Your US Tax Status \r\n\t\t\t\r\n\t\t\t<\/h2>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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First off, you need to know that your tax obligations primarily depend<\/span> on your <\/span>residency status<\/span>. For tax purposes<\/span>, you may be classed as either a <\/span>\u2018<\/span>Resident Alien<\/span>\u2019<\/span> or <\/span>\u2018<\/span>Non-Resident Alien<\/span>\u2019<\/span>,<\/span> which will <\/span>determine<\/span> how your income will be taxed by <\/span><\/span>IRS<\/span><\/span>.<\/span>\u00a0<\/span><\/span><\/p>\n
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Residency for US Tax Purposes \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Several tests will help you <\/span>identify<\/span> your residency status:<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tSubstantial Presence Test \r\n\t\t\t\r\n\t\t\t<\/h4>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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This is the most common way a Canadian citizen living and working in the US becomes a US tax resident. You generally meet this test if you are physically present in the United States for:\u00a0\u00a0<\/p>\n
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At least 31 days during the current year, and\u00a0<\/li>\n
183 days over a three-year period (current year + 2 prior years), using a specific calculation (current year days x 1 + first prior year days x 1\/3 + second prior year days x 1\/6).\u00a0<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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If you are a lawful permanent resident<\/span> in the US<\/span>, <\/span>also called a <\/span>green card <\/span>holder, <\/span>you are automatically considered a Resident Alien for US tax purposes.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tFirst-Year Choice \r\n\t\t\t\r\n\t\t\t<\/h4>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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In certain situations, if you <\/span>meet<\/span> the Substantial Presence Test in the year following your arrival but not in the year of arrival, you might be able to <\/span>elect<\/span> to be treated as a resident for part of your first year. This can <\/span>impact<\/span> your <\/span>initial<\/span> tax years.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Non-Resident Alien vs. Resident Alien \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Your residency status will <\/span>determine<\/span> how you will be taxed:<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tA. If You Are a Resident Alien \r\n\t\t\t\r\n\t\t\t<\/h4>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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This means you passed the Substantial Presence Test or Green Card Test. The IRS will <\/span>generally tax<\/span> you on your worldwide income, <\/span>like with<\/span> US citizen<\/span>s<\/span>. <\/span>A<\/span>ll your income, no matter where <\/span>it comes<\/span> from<\/span>, is subject to <\/span><\/span>US taxation<\/span><\/span>.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tB. If You Are a Non-Resident Alien \r\n\t\t\t\r\n\t\t\t<\/h4>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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If you do not meet either test, you are <\/span>usually <\/span>taxed only on <\/span>your <\/span>US-sourced income. This <\/span>often applies to<\/span> Canadian resident<\/span>s<\/span> with US income who spend limited time in <\/span><\/span>the USA<\/span><\/span> but earn from US sources.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t $\"canadian$ \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tTax Filing for Canadians Working in the US \r\n\t\t\t\r\n\t\t\t<\/h2>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Once you <\/span>determine<\/span> your tax residency status<\/span>, <\/span>learn about <\/span>your tax o<\/span>bligations<\/span> and<\/span> <\/span>Canadian filing US tax return<\/span><\/span> requirements<\/span>.\u00a0<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Your Tax Labilities in the US \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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US employees are generally subject to payroll taxes<\/a><\/span>, also known as FICA taxes, which consist of Social Security and Medicare.\u00a0\u00a0<\/p>\n
Most states in the US also have their own state income tax<\/a><\/span>, and some localities may have local taxes. Your liability for these depends on where you work and reside within the USA.\u00a0\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Filing Your US Tax Return \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Your employer will typically withhold federal, state, and local taxes directly from your payroll. However, if you are self-employed<\/span><\/a>, you file tax forms as follows:\u00a0\u00a0<\/p>
Form 1040 (U.S. Individual Income Tax Return) <\/strong>\u2014 if you are considered a US Resident Alien; this is your primary federal income tax<\/a> <\/span>form (used to report all your worldwide income to the IRS)\u00a0<\/li>
Form 1040-NR (U.S. Nonresident Alien Income Tax Return)<\/strong> \u2014 if you are a Non-Resident Alien (used to report your US-sourced income)\u00a0<\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tWhat Is the Canada-US Tax Treaty? \r\n\t\t\t\r\n\t\t\t<\/h2>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The IRS and the CRA have a tax treaty, so you do not get taxed on the same income. This tax treaty determines which of the two countries has the right to tax specific types of income.\u00a0\u00a0<\/p>
Here are what the tax treaty consists of:\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Residency Tie-Breaker Rules \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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If you meet the residency definitions of both countries under their domestic <\/span><\/span>tax laws<\/span><\/span> (e.g., you meet the US Substantial Presence Test and are also considered a Canadian resident), the treaty provides \u2018<\/span>tie-breaker<\/span>\u2019 rules to <\/span>determine<\/span> which country you are a resident of for treaty purposes. This typically involves looking at your permanent home, <\/span>centre<\/span> of vital interests, habitual abode, and nationality.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Saving Clause \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The treaty <\/span>generally allows<\/span> each country to tax its own citizens and residents as if the treaty did not exist, with major exceptions for Canadian citizens to avoid double taxation.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Specific Income Types \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The treaty outlines how various types of income (e.g., employment income, business profits, pensions, real estate income) are to be treated, specifying whether one country has exclusive taxing rights or if the other country provides a credit for tax paid.\u00a0<\/p>\n
Another important concept about Canadian citizen working in USA tax are the totalization agreements aimed at preventing double taxation on social security contributions<\/a><\/span>. This ensures you only contribute to one country’s social security system at a time, depending on the duration and nature of your employment.\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tHow to Avoid Double Taxation \r\n\t\t\t\r\n\t\t\t<\/h2>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Even with the treaty, <\/span>learn<\/span> how <\/span>to<\/span> proactively prevent double taxation, too:<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Foreign Tax Credit \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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If you pay tax to the USA on income that is also taxable in Canada, the Canada Revenue Agency (CRA) generally allows you to claim a foreign tax credit on your Canadian income tax return for the US taxes paid.\u00a0<\/p>\n
This credit reduces your Canada tax on overseas income by the amount of US tax paid, up to your Canadian tax liability on that foreign income. The IRS offers a similar credit on Form 1116 for US residents with foreign income.\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Foreign Earned Income Exclusion (FEIE)\r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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This is less<\/span> common for those directly working and living in the US, but <\/span>this <\/span>allows qualifying US citizens or Resident Aliens to exclude a certain amount of foreign earned income from US taxation if they meet specific residency tests. This is more relevant for US citizens working abroad, <\/span>however<\/span>.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tWhat If You Own US Real Estate? \r\n\t\t\t\r\n\t\t\t<\/h2>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Do you own real estate in the US, too, while working? Or you may have bought vacation properties in the warmer parts of the US to rent them out once you are back to Canada. If you own a US property, whether rented or sold, you will have to face US taxes.\u00a0<\/span>\u00a0<\/span><\/p>\n
One exception with rental is if you rent out vacation property for less than 15 days a year. Your tax implications depend on what you are doing with your US real estate.<\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Tax on Rental Income from Your US Property \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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You generally have two main options to settle your rental income tax. The first is a flat 30% US withholding tax on gross rent, collected by your tenant\/manager, which helps you avoid the need to file a US income tax return.\u00a0\u00a0<\/p>\n
The second, generally more tax-efficient, option involves electing to treat income as effectively connected to a US business, filing a Form 1040NR, and paying tax on net rental income at graduated US income tax rates<\/a> <\/span>after deducting expenses.\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\t\u2022 Tax on Sale of Your US Property \r\n\t\t\t\r\n\t\t\t<\/h3>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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There are also 2 main tax implications when you sell your US property as a Canadian citizen. First, a 15% US withholding tax (FIRPTA) on gross sale proceeds is generally applied at transfer, though exceptions exist.\u00a0<\/span>\u00a0<\/span><\/p>
Second, you file a US non-resident tax return (Form 1040NR) to report the sale’s components, including capital gains and depreciation recapture, to determine your final US tax liability.<\/span>\u00a0<\/span><\/p>
Cross-border property sales can be very complex. Be sure to reach a <\/span>cross-border tax specialist<\/a><\/span> in this case.<\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\r\n\t\t\t\r\n\t\t\t\tTax Help for Canadian Citizen Working in US Taxes \r\n\t\t\t\r\n\t\t\t<\/h2>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Canadian citizen working in US taxes<\/span> <\/span>is a concern usually <\/span>assisted<\/span> by cross-border accountan<\/span>ts<\/span>, as they<\/span> specialize in tax treat<\/span>ies between countries. This is where Legend Fusions come in. Our Canada-US tax accountant can help you understan<\/span>d your tax obligations better, streamline your filing, and take ad<\/span>vantage of any hidden savings. <\/span><\/span>Talk to our cross-border tax specialist today<\/span><\/span><\/a><\/span>!\u00a0<\/span><\/span>\u00a0<\/span><\/p>\n
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\r\n\t\t\t\r\n\t\t\t\tReviewed by:\r\n\t\t\t\r\n\t\t\t<\/div>\r\n\t\t<\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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$\"Jeffery\"$ <\/figure>
Jeffrey Ross <\/p>
Jeffrey Ross is an experienced tax accountant focused on US-Canada cross-border taxation, with over three years in the industry, including a key role as client manager at a Canadian tax firm. He provides expertise in corporate and personal tax planning, specializing in non-resident tax, capital gains, CRA and IRS compliance, and retirement planning. Known for his personalized approach, Jeffrey is dedicated to guiding clients with clear, practical advice tailored to complex tax scenarios, aligned with the evolving tax laws. <\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\tLinkedin<\/span>\n\t\t\t\t\t\t