Americans living abroad automatically receive a two-month extension to file their U.S. tax returns
Americans who live in Canada are considered income tax residents of both countries. But in most cases, double taxation on worldwide income can be eliminated or reduced.. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know. For more from Globe Advisor , visit our
U.S. citizens are required by law to file a U.S. tax return annually and declare their worldwide income – including Canadian-source employment income, investment income and capital gains – adjusted for U.S. dollars, despite the fact they no longer physically live in the U.S. or earn income there. Under the Canada-U.S. Tax Treaty, Canada Pension Plan, Old Age Security and U.S. Social Security benefits are exempt from U.S. income taxes.
Also, given that net income tax rates are generally higher in Canada, U.S. taxpayers who are resident in Canada for tax purposes are entitled to reduce or eliminate exposure to U.S. taxes through the use of foreign tax credits . Additional IRS filing requirements could exist for Americans living in Canada who have an interest in a Canadian business, trust or tax-free savings account, or who received a gift or inheritance from a non-U.S. person.” to determine who is a U.S. resident for tax purposes. Those who wish to avoid being treated as a U.S. resident can file IRS Form 8840 by June 17 for the 2023 taxation year.
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