Cardinal Point Wealth Management

Your Cross-Border Financial Advisor

Contact Us | Client Login
  • About Us
    • Our Story
    • Our Team
    • Our Clients
    • Legal and Compliance
    • Part 3 Form CRS
    • Relationship Disclosure Information
  • What We Do
    • Investment Management
    • Wealth Planning
    • Tax Planning and Preparation
    • Private Wealth Services-U.S.
    • Private Wealth Services-Canada
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • Business Management for Athletes
  • Cross-Border Services
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • U.S. citizens living in Canada
    • Moving to Canada from the U.S.
    • Canadians Living in the U.S.
    • Moving to the U.S. from Canada
    • Expatriates Living Abroad
  • Blog
  • About Us
    • Our Story
    • Our Team
    • Our Clients
    • Legal and Compliance
    • Part 3 Form CRS
    • Relationship Disclosure Information
  • What We Do
    • Investment Management
    • Wealth Planning
    • Tax Planning and Preparation
    • Private Wealth Services-U.S.
    • Private Wealth Services-Canada
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • Business Management for Athletes
  • Cross-Border Services
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • U.S. citizens living in Canada
    • Moving to Canada from the U.S.
    • Canadians Living in the U.S.
    • Moving to the U.S. from Canada
    • Expatriates Living Abroad
  • Blog

West Coast Taxes for Retired Divorced U.S. Citizen

May 6, 2022 By Cardinal Point Wealth

Summary and Takeaways

Many factors deserve careful consideration if you are contemplating a move, especially if your dual U.S. and Canadian citizenship offers plentiful options. Housing affordability, healthcare, proximity to loved ones, and the climate are all worthy considerations.

It’s also important to understand how taxes can potentially impact your income. While taxes should never be the deciding factor when making major lifestyle decisions, they can play a contributing role in the process. This blog uses a hypothetical case study and four popular North American West Coast destinations to illustrate how taxes might affect you, depending on where you decide to live.

Key Takeaways

  • The hypothetical example uses a 73-year-old divorced U.S. and Canadian citizen, and he will have an estimated income of $146,811 USD
  • He’s looking to move to either Alberta, British Columbia, Washington, or California
  • His income includes $30,000 USD in Social Security and $5,000 CAD from a Canada Pension Plan
  • The analysis reveals that he could potentially see an income differential $10,000 USD ($13,000 CAD) – depending on where he resettles.

As cross-border financial and tax advisors, we are constantly being asked by clients as to where it is better to retire – Canada or the U.S.? Further, if Canada or the U.S., which provinces or states should be considered? This decision has endless personal factors, such as where your family and friends are located, accessibility to viable healthcare and immigration options, weather, housing availability and affordability, etc. However, one factor that should not drive the decision, but is always discussed, is taxes.

This is a high-level comparison of 2022 taxes based on a hypothetical person, David, who is a 73-year-old divorced U.S. and Canadian citizen trying to determine where to settle in retirement. David has identified four options on the West Coast of North America that he believes will fit his lifestyle – California, Washington, British Columbia, or Alberta. David has the following expected 2022 income:

  • U.S. Social Security = $30,000 USD based on 40 years of working in the U.S.
  • Canada Pension Plan = $5,000 CAD based on a 10-year working assignment to Canada when David was younger
  • annual required minimum distribution from U.S. IRA = $100,000 USD
  • annual required minimum distribution from Canadian RRIF = $10,000 CAD
  • annual interest income from U.S.-based term deposits = $5,000 USD
America West Coast

We will assume that David is in good health, uses the single standard deduction on his U.S. tax return, and has no other deductions or tax credits (eg. medical or donations) available on his potential Canadian tax return. We will also assume a $1.27 foreign exchange rate from USD to CAD, and ignore the 3.8% U.S. Net Investment Income Surtax that could apply on specific sources of taxable income.

Based on the previous assumptions, David has the following income in USD & CAD:

Income Source Income (USD) Income (CAD)
Canada Pension Plan 3,937 5,000
U.S. IRA 100,000 127,000
Canadian RRIF 7,874 10,000
U.S. Term Deposits 5,000 6,350
Total 146,811 186,450

Here is the high-level tax comparison between David’s four options on the West Coast of North America that he believes will fit his lifestyle – California, Washington, British Columbia, or Alberta:

Province/State Estimated Total Tax (USD) Estimated Total Tax (CAD) Estimated Income Available Net of Tax (USD) Estimated Income Available Net of Tax (CAD)
Washington 26,000 N/A 120,811 153,430
California 36,358 N/A 110,453 140,276
British Columbia N/A 37,000 117,677 149,450
Alberta N/A 36,000 118,465 150,450

As you can see, there is a $10,000 USD ($13,000 CAD) difference in estimated income available net of tax between Washington and California. Again, tax savings should never drive the decision of where to settle, but it is certainly a factor worth planning for, and the compounding effects can be substantial.

If a scenario like the one we have presented is something that you might be considering, please contact Cardinal Point in order to review your necessary and unique planning requirements and the completion of cash flow and tax projections to better help your decision making.

Filed Under: Articles

Related Artices

ca us desk flags

Does Canada have a Tax Treaty with the US?

currency

Hedging Currency in your Portfolio

Terry Ritchie in Podcast

Terry Ritchie on Unraveling Cross-Border Financial Planning

Discuss your goals with us today
Canada US Investment Management
We can handle all of your Canada-U.S. investment management, tax, estate and financial planning complications
Wealth management strategies fit for you
Wealth Management Strategies
Our cross-border financial planning team can provide an assessment of your needs based on your unique circumstances

How We Help

  • Cross-Border Financial & Tax Planning
  • Americans Living in Canada
  • Canadians Living in the U.S.
  • Moving to Canada from the U.S.
  • Moving to the U.S. from Canada
  • Expatriates Living Abroad

What We Do

  • Investment Management
  • Wealth Planning
  • Tax Planning & Preparation
  • Private Wealth Services for U.S. Residents
  • Private Wealth Services for Canadian Residents
  • Cross-Border Financial & Tax Planning
  • Business Management for Athletes

Resources

  • Canadians in California
  • Canadians in Texas
  • Canadians in Florida
  • Canadians in Arizona
  • Canadian and U.S. Expat Tax Planning
  • Wealth Management for U.S. Citizens in Canada
  • Custodian Closed Your Cross-Border Investment Account?

Videos & Social Media

  • Americans in Canada: Investment Basics
  • Americans Selling Canadian Homes Face Tax Issues
  • Does it make financial sense to renounce your U.S. citizenship?
    BrightScope Cardinal Point Twitter Cardinal Point Google Plus Cardinal Point Facebook Cardinal Point LinkedIn Cardinal Point
Copyright © 2023 Cardinal Point Capital Management, ULC. All Rights Reserved.

“Cardinal Point” is the brand under which dedicated professionals within Cardinal Point Capital Management, ULC provide financial, tax and investment advisory, risk management, financial planning and tax services to selected clients. Cardinal Point Capital Management, ULC is a US registered investment advisor and a registered portfolio manager in Canada (ON, QC, MB, SK, NS, NB, AB, BC). Advisory services are only offered to clients or prospective clients where Cardinal Point and its representatives are properly registered or exempt from registration. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.