Moving to Canada: Key Considerations for US Expats

Moving to Canada is an exciting opportunity for many Americans, whether it’s for work, family, or a new lifestyle. However, before packing your bags and heading north, it’s essential to understand a few critical aspects of living in Canada, especially when it comes to taxes. This guide will help you navigate the process of moving to Canada as a US citizen, including entry permits, the best places to live, and how to manage your tax obligations.

Understanding Entry Permits for US Citizens Moving to Canada

The first step when moving to Canada is ensuring that you can legally enter and stay in the country. As a US citizen, you do not need a visa for short stays (less than six months), but you’ll need to apply for the appropriate permits or status if you plan to live or work in Canada long-term.

1. Temporary Resident Visa (TRV): If you’re planning to visit Canada temporarily, you may need a TRV. However, many US citizens are exempt from needing a TRV.

2. Work Permits: If you’re moving for employment, you’ll need a work permit. This can either be employer-specific or open, depending on the type of work you’re planning to do. A job offer from a Canadian employer is typically required.

3. Permanent Residency: For those moving with long-term intentions, applying for permanent residency through programs like Express Entry, Family Sponsorship, or Provincial Nominee Programs (PNP) is necessary. Each program has specific eligibility requirements, including language skills, work experience, and education.

Choosing the Best Place to Move in Canada

Canada is a vast country with diverse regions offering unique experiences. Deciding on the best place to move depends on various factors such as job opportunities, climate preferences, and lifestyle needs. Here are some popular places to consider:

1. Toronto, Ontario: As Canada’s largest city, Toronto is a hub for finance, technology, and international business. If you’re moving for career opportunities, Toronto offers a thriving job market and a multicultural environment.

2. Vancouver, British Columbia: If you love nature, Vancouver offers a stunning combination of mountains and ocean. It’s a city for those who value an active lifestyle, with a growing tech and entertainment scene.

3. Montreal, Quebec: Known for its vibrant culture and French-speaking community, Montreal is ideal for those seeking a bilingual experience. It has a lower cost of living compared to other large Canadian cities and is a hub for arts, technology, and gaming.

4. Calgary, Alberta: Known for its oil and gas industry, Calgary offers plenty of job opportunities, especially for those in energy sectors. It’s also surrounded by incredible natural beauty, including the Rocky Mountains.

5. Ottawa, Ontario: As Canada’s capital, Ottawa is known for its political and governmental institutions. It’s a quieter city compared to Toronto but offers a rich cultural scene and an excellent quality of life.

Taxes for US Citizens Moving to Canada

One of the most important things to consider when moving to Canada is how your taxes will be affected. Both the US and Canada have different tax systems, and there are a few critical areas to keep in mind:

US Taxes don’t stop when you move to Canada

When moving to Canada, many Americans mistakenly believe that their US tax obligations end once they leave the country. However, as a US citizen, you are still required to file a tax return with the IRS, reporting your worldwide income, regardless of where you live. Here’s what you need to know about US taxes when moving to Canada, including types of income to report and available credits and exclusions.

Types of Income to Report

• Wages and Salary: All income earned from employment in Canada must be reported to the IRS. This includes wages, salaries, and bonuses, even if taxes were already withheld by Canadian employers.

• Self-Employment Income: If you are self-employed or run a business in Canada, this income must be reported to the IRS. You’ll also need to pay self-employment taxes (Social Security and Medicare) unless you’re exempt due to a totalization agreement between the US and Canada.

• Investment Income: Interest, dividends, capital gains, and rental income from Canadian sources must also be reported. For rental income, be sure to factor in expenses such as property management fees or repairs that may be deductible in both countries.

• Retirement Income: Pension income from US sources, such as Social Security, must be reported. Additionally, Canadian pension income, such as payments from the Canada Pension Plan (CPP), also needs to be disclosed.

• Other Foreign Income: Any income earned from foreign sources, including income from Canadian investments, business interests, or freelance work, must be reported to the IRS.

Applicable Credits and Exclusions

• Foreign Earned Income Exclusion (FEIE): Under IRS rules, you can exclude up to $126,500 (for tax year 2024) of earned income from US taxes if you meet specific requirements, such as the Physical Presence Test (330 days out of 12 months in a foreign country) or the Bona Fide Residence Test (being a resident of Canada for an entire tax year).

• Foreign Tax Credit (FTC): The FTC allows you to offset US tax liability with taxes paid to the Canadian government. For example, if you pay Canadian income tax on your earnings, you may be able to claim a credit on your US tax return to avoid double taxation.

• Foreign Housing Exclusion or Deduction: If you qualify for the FEIE, you may also exclude certain housing expenses (such as rent or utilities) from US taxation, up to specific limits.

• Tax Treaty Benefits: The US-Canada Tax Treaty can help prevent double taxation on income like pensions, dividends, and interest. The treaty sets limits on how much tax each country can charge on specific types of income.

Canadian Taxes for US Citizens

When moving to Canada, US citizens must also become familiar with the Canadian tax system. Canada operates a separate tax structure, and you will need to file Canadian taxes in addition to your US tax return

Tax Residency in Canada

In Canada, your tax obligations are primarily based on your residency status. The Canada Revenue Agency (CRA) considers you a tax resident if you have established significant ties to Canada. These ties include:

• A home in Canada
• A spouse or dependents residing in Canada
• A Canadian driver’s license or health card
• Bank accounts or personal property in Canada

If you’re deemed a resident for tax purposes, you’ll be required to report and pay taxes on your worldwide income, just as you would in the US. If you are considered a non-resident, you are generally only taxed on income earned within Canada.

Federal and Provincial Taxes

Canada has a progressive income tax system, meaning the more you earn, the higher the rate at which you’re taxed. Taxes are levied at two levels:

• Federal Taxes: The Canadian federal government imposes income tax, which ranges from 15% to 33%, depending on your income bracket.
• Provincial and Territorial Taxes: Each province and territory has its own set of income tax rates, which vary from 4% to 25%. For example, Quebec has some of the highest provincial tax rates, while provinces like Alberta offer a flat rate.

Because taxes are applied at both levels, your total tax burden will depend on where you live in Canada. The provinces with higher taxes generally offer more extensive social services, such as healthcare, while those with lower taxes might offer fewer services but have a more affordable cost of living.

Goods and Services Tax (GST) / Harmonized Sales Tax (HST)

In addition to income taxes, Canada imposes a Goods and Services Tax (GST) or Harmonized Sales Tax (HST) on most goods and services purchased. The GST is 5%, but certain provinces have harmonized the GST with their own provincial sales taxes, resulting in a combined rate of up to 15%.

• GST applies to goods and services across Canada.
• HST is applicable in provinces like Ontario, Nova Scotia, and New Brunswick.

While most goods and services are subject to GST or HST, there are exemptions, such as certain food items, medical supplies, and education-related services.

Tax Deductions and Credits

Canada offers a variety of tax credits and deductions that can reduce your taxable income:

• Basic Personal Amount: All taxpayers are eligible for a basic personal amount, which is a non-refundable credit that reduces the amount of tax you owe.
• Child Care Expenses: If you have children, you can claim deductions for child care expenses.
• Medical Expenses: You can deduct certain medical expenses that exceed a certain percentage of your income.
• Charitable Donations: Donations to registered charities can result in tax credits that lower your taxable income.

Unlike the US, which allows itemized deductions, Canada generally provides non-refundable tax credits, which reduce the amount of tax owed, but do not provide a refund if your credits exceed your tax liability.

US and Canada Tax Filing Deadlines

When moving to Canada, it’s crucial to be aware of both US and Canadian tax filing deadlines. Since you will still be a US citizen, you must continue to file your US taxes, even while living in Canada. At the same time, you must comply with Canada’s tax obligations.

US Tax Filing Deadlines

As a US citizen living in Canada, you are required to file a US tax return with the IRS, reporting your worldwide income. Here are the important US tax filing deadlines to keep in mind:

• April 15: The standard deadline for filing your US tax return. If you live outside the US on the due date, you are automatically granted a 2-month extension to June 15.
• June 15: If you’re living abroad, your tax return is due by this date without needing to request an extension. However, any tax due is still subject to interest and penalties starting from April 15, so it’s important to pay any taxes owed by April 15 to avoid penalties.
• October 15: If you need more time to file your US tax return, you can request an automatic extension by filing Form 4868 by June 15. This gives you until October 15 to submit your tax return. Note that this extension only applies to filing the return, not to paying any taxes owed.
• Other Forms (e.g., FBAR, FATCA): In addition to the standard tax return, if you have foreign bank accounts or assets, you must file FinCEN Form 114 (FBAR) and Form 8938 (FATCA). The deadline for these forms is the same as your tax return deadline, with an automatic extension to October 15 if you file for an extension.

Canadian Tax Filing Deadlines

In Canada, tax deadlines are based on your residency status and whether you are self-employed or employed. US citizens living in Canada must be aware of the Canadian tax filing deadlines:

• April 30: This is the standard deadline for most individuals to file their Canadian income tax returns. The date applies to individuals who are not self-employed. If April 30 falls on a weekend or holiday, the deadline is typically extended to the next business day.
• June 15: For self-employed individuals, the deadline to file your Canadian tax return is June 15. However, if you owe taxes, you must pay any balance owing by April 30 to avoid interest and penalties.
• Payment Deadline (April 30): Regardless of whether you file your return by April 30 or June 15 (if you’re self-employed), any taxes owed are due by April 30. Failure to pay on time can result in interest and penalties, even if you file late.
• Other Forms and Information: If you need to file additional forms, such as Form T1135 (Foreign Income Verification Statement), this must also be submitted by your tax filing deadline (April 30 for most individuals).

Social Security and Pension Taxes for US Citizens Moving to Canada

When you move to Canada as a US citizen, one of the key tax concerns is how both countries handle Social Security and pension contributions. This topic involves understanding how contributions to the US Social Security system interact with Canada’s pension plan, as well as the tax treatment of your US pension income in Canada.

US Social Security Taxes and Canada Pension Plan (CPP)

• Social Security Contributions in the US: As a US citizen, you are generally required to contribute to the Social Security system on income earned in the US or worldwide if you are working. The US Social Security tax rate is 6.2% for employees (with an additional 1.45% for Medicare), and employers match these contributions. If you are self-employed, you are responsible for both the employee and employer share, totaling 12.4%.

• Canada Pension Plan (CPP): In Canada, the primary social insurance system is the Canada Pension Plan (CPP), which provides retirement benefits, disability benefits, and survivor benefits. Canadian workers contribute to the CPP through payroll deductions, at a rate of 5.95% (as of 2025), and employers match this amount. Self-employed individuals pay both portions, amounting to 11.9%.

US-Canada Totalization Agreement

One of the most important aspects of Social Security and pension taxes for US citizens moving to Canada is the US-Canada Totalization Agreement, a treaty designed to prevent double taxation of social security contributions. This agreement ensures that you won’t be required to pay into both the US Social Security system and the Canadian CPP on the same income.

• Exemption from Double Contributions: Under the Totalization Agreement, if you are working in Canada, you generally only have to contribute to the Canada Pension Plan (CPP) and not the US Social Security system on your Canadian earnings. Similarly, if you return to the US and are working there, you would only be required to contribute to the US Social Security system, not the CPP, on your US earnings.

• Self-Employment: If you are self-employed, the Totalization Agreement can also help. You will generally pay into the Canada Pension Plan if you are residing and working in Canada, but you may still be required to pay Social Security taxes on your US-based income.

• Benefits from Both Systems: The Totalization Agreement allows you to combine your work credits from both the US and Canada to qualify for benefits under either system, such as Social Security retirement benefits or Canada Pension Plan benefits, if you have worked long enough in both countries. These benefits are prorated based on the number of credits earned in each country.

Planning for Retirement and Pension Taxation

Planning for retirement as a US citizen in Canada requires understanding how both the US and Canadian tax systems handle pension income. Here are some key strategies:

• Tax-Deferred Retirement Accounts: US retirement accounts such as IRAs or 401(k)s may have tax-deferred status in the US. However, Canada does not provide tax-deferred treatment for these accounts. It’s important to understand how contributions and withdrawals from these accounts are taxed in both countries.

• RRSPs and RRIFs: In Canada, Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) are popular ways to save for retirement. These accounts offer tax deferral similar to US 401(k)s. However, US citizens will need to file specific forms (such as Form 8891 or Form 8938) to report foreign pension accounts to the IRS.

Practical Tips for Moving to Canada

Aside from the immigration and tax details, there are a few practical things to consider when making the move:

• Healthcare: Canada offers universal healthcare, but it’s important to know that it can take a few months to get your health card, so consider having private health insurance in the interim.
• Cost of Living: Depending on where you move, the cost of living can vary significantly. Toronto and Vancouver are among the most expensive cities, while places like Quebec City or Edmonton tend to have more affordable living costs.
• Banking and Currency: Open a Canadian bank account as soon as you can and get familiar with the Canadian dollar (CAD). It’s also advisable to have some savings in Canada for your initial settlement.
• Driving: While your US driver’s license is valid for a short time in Canada, you’ll eventually need to exchange it for a Canadian license. Rules for exchanging licenses vary by province.

Moving to Canada as a US citizen can be a smooth process when you’re prepared. From securing the right entry permits to understanding your tax obligations, planning ahead is crucial. With the right approach to managing both your personal and financial matters, you’ll be able to enjoy everything Canada has to offer while maintaining compliance with both US and Canadian tax laws.