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East Coast Taxes for Retired Divorced U.S. Citizen

May 24, 2022 By Cardinal Point Wealth

As cross-border financial and tax advisors, we are constantly being asked by clients as to where it is best 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.

Am I a U.S. tax resident?

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 East Coast of North America that he believes will fit his lifestyle – Florida, New York, Ontario, or Quebec. 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
Income Source Income (USD) Income (CAD)
U.S. Social Security 30,000 38,100
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 4 options on the East Coast of North America that he believes will fit his lifestyle – Florida, New York, Ontario, or Quebec:

Province/State Estimated Total Tax (USD) Estimated Total Tax (CAD) Estimated Income Available Net of Tax (USD) Estimated Income Available Net of Tax (CAD)
Florida 26,000 N/A 120,811 N/A
New York 34,311 N/A 112,500 142,875
Ontario N/A 42,000 113,740 144,450
Quebec N/A 51,000 106,654 135,450

As you can see, there is a $14,000 USD ($18,000 CAD) difference in estimated income available net of tax between Florida and Quebec. This difference may be partially or fully offset by the increased cost of U.S. healthcare compared to Canadian healthcare.  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.

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"Cardinal Point" is the brand under which the dedicated professionals within the independent Cardinal Point Group of Companies collaborate to provide financial and investment advisory, risk management, financial planning and tax services to selected clients. Cardinal Point comprises two legally separate companies: Cardinal Point Wealth Management Partners, LLC, a U.S. registered investment advisor and Cardinal Point Capital Management ULC is a U.S. 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 the independent Cardinal Point firms and its representatives are properly registered or exempt from registration. Each firm enters into client engagements independently. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.