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.
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.