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Moving to the U.S. from Canada

Moving can be traumatic, even when your employer is paying for the move.  I’ll get into taxes in a moment, but there are some non-tax issues, the primary one being your vehicles.  You may travel across the border many times as a tourist, but to import your vehicle, it must have been qualified by the manufacturer for US safety and emissions standards.  There are several models that qualify in Canada and not the US, and visa versa.  Check with US Customs before you leave, or you may find yourself at the border with your kids and all your possessions, and not be able to cross.  There are used car dealers at the more popular border crossings that do quite a business purchasing (at fire sale prices) vehicles that do not qualify for importation to the United States.

Canada taxes people based on residence and income from certain Canadian property.  When you leave Canada, you must file a final Canadian tax return, reporting all of your income until the time you leave, plus all of your income for the year for Taxable Canadian Property (primarily real estate or closely-held Canadian businesses).  You are deemed to have sold all of your property at fair market value at the time you leave (with certain exception), so there may be capital gains on your final tax return.

The United States also taxes based on residence in the year you arrive, with several important tax elections available—these elections could save you considerable money.

In the year you arrive, you are either a non-resident or a dual-status taxpayer, depending on when during the year you arrive, and if a non-resident, the results of an election you can make after qualifying as a resident in the next year. (If that sounds confusing, it is because it is confusing)! 

If you are a US resident at the end of the year, you can make an election to be treated as a resident for the entire year.  The price of this election is taxing your worldwide income for the entire year, including income earned before arriving in the US.  The benefit is you are entitled to some deductions that are not normally available in the dual-status year. An additional election is available to file a joint return with your spouse in that first year.

The United States has special reporting for RRSP accounts, as well as all foreign bank accounts.  There are US issues with Canadian Mutual Funds, and Canadian issues dealing with taxation of financial and securities accounts that remain in Canada. There are also significant US tax issues with Tax Free Savings Accounts (TFSA) and Registered Education Savings Plans (RESP).

It is important to coordinate the Canadian and US tax filing in the year of the move to make sure it is done right, and that you take advantage of all elections that are available to you.  We can help you.

If you maintain investments in Canada, it is important to change your address with the organization that holds your investment to your new US address.  While it is tempting to use the Canadian address of a friend or relative, it will get you in trouble with the Canada Revenue Agency.