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I'm a U.S. citizen and software developer that can work from home. I work for a company based in Washington and will be able to keep my job as I move to Canada to be with my Canadian fiance (will be my wife when I move).

What taxes will I have to pay? Will I be paying taxes to both governments? Is there anything I might have not considered that I should be aware of?

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  • Are you going to (continue to) work for your company as an employee or are you going to work as a subcontractor? Commented Feb 24, 2011 at 21:04
  • I'm going to continue to work as an employee Commented Feb 24, 2011 at 22:26

2 Answers 2

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As with all tax questions, you need to do your own research and possibly consult a professional. Here is what I have found to be true while working outside the US. However, I have never worked in Canada, so I'm not sure of the rules specific to living there.

In general, the US government wants your income taxes regardless of where you live. If you're in a situation where the country that you live in also wants you to pay taxes on your income, you are then allowed to deduct those taxes from the amount you owe the US government. So basically, you have to pay at least the amount of taxes that you would owe the US. If you pay less than that elsewhere, you pay the difference to the US, otherwise you just pay local taxes. Either way, you still have to file your US tax return, even if you don't owe anything.

Of course the stuff above about paying local taxes mostly just applies if you're working in another country, for a company that's based in that country. Since you're working remotely for a US-based company, you might not actually pay any local taxes, but that depends on Canada's laws, with which I am not familiar. Either way, there's no way to get out of paying at least what you owe in US federal income taxes.

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Your situation is strange, but not too rare. Find an accountant familiar with these types of setups, and ask him for advice/have him prepare your taxes, since the devil is in the details, and generalities below may not apply, or apply differently to you (he'll be able to answer questions along the lines of "which country should I pay my taxes to first?", for example).

That said, generally speaking:

Canada and the US have income tax treaties in place. You should, once all is said and done, find yourself mostly paying taxes in just one country, and paying off some small differences in the other.

Most likely you have taxes deducted on your US salary by your employer. On your Canadian return, you'll be able to claim the vast majority, but not all, taxes paid in the US as deductible. Canadian taxes are generally higher than in the states, and you will find yourself responsible for both the difference in taxes, and for (a small portion) of taxes not covered by treaties.

It may not be applicable to you, though - you may find that you're required to pay most of your income taxes in Canada, and not in the states. It may be that almost all of your US taxes will be refunded to you, and you'll find yourself paying full Canadian income tax.

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