I do. But what about my taxes?

David A. Altro is a frequent contributor to Paul Delean’s business column in the Montreal Gazette, scroll down to read David’s answer to the first question, about cross border marriage and taxes.

The Gazette
Monday, August 22, 2011

Relocating to the U.S. and cancelling a life-insurance policy were among the subjects raised in the latest batch of reader letters. Here’s what they wanted to know.

Q: “I am a Canadian living in Quebec, in a relationship with a Vermont resident. Should we marry and reside in Vermont, can I continue to work in Canada? Who do I owe taxes to? Should we not marry, can I reside in Vermont and continue to work in Canada? Anything else I should consider?”

A: Local attorney David Altro, who works in both countries, says that if you don’t marry, you won’t have the right to live in the U.S. without a work visa or Green card.

If you do marry a U.S. resident, that person can sponsor you to obtain a Green card. “You will always have the right to work in Canada as you will always be a Canadian citizen,” Altro said. If you reside in the U.S. and work in Canada, you will pay income tax to the Canada Revenue Agency for your Canadian-sourced income and also file U.S. income-tax return Form 1040 declaring your worldwide income. Under the Canada-U.S. Tax Treaty, you’ll be entitled to a foreign credit on your U.S. return for taxes paid in Canada. If you leave Canada, there may also be departure tax issues to look into, Altro noted.

Q: “I am a single, 59-year-old male, retired, living on Quebec Pension Plan payments. Since the death of my dear brother this past April, at age 66, I have no living relatives, nor close friends that I would consider leaving my house and estate to. I do have life insurance and a will, but the beneficiary would have been my brother. Should I cancel the life insurance and will, or just forget about it and leave it to the government?”

A: You don’t specify what the life-insurance policy costs you annually. It can be a substantial expense for older people, especially if your income is limited and there’s no longer a family beneficiary that you’re looking to protect or assist. It could probably go if you have enough assets to cover funeral/ burial expenses (which you can prepay, if you desire, to simplify matters). You mention having a house, which is a significant asset.

Since you already have a will, modifying it to designate somebody else as beneficiary is a relatively simple task, and that somebody could well be a charity or church of your choice.

This way, you get to decide how your personal legacy is distributed, not the government.

Q: “I’m 61 and since August receive a monthly pension (RREGOP) as a former employee of the government of Quebec.

But I’m still working and receiving other income as an independent worker. To reduce income tax, I’d like to split my pension with my wife.

How do I go about doing that? Can my wife contribute to her RRSP using that income?”

A: The RREGOP pension is eligible for splitting and as much as 50 per cent can be allocated to your wife, said Sydney Berger, tax partner at accounting firm Bessner Gallay Kreisman. That election is done on your respective income-tax returns, by completing form T1032 (federal) and Schedule Q (Quebec), and no further steps are required.

“Pension income transferred to your wife is not earned income for purposes of calculating the annual RRSP contribution room,” Berger said.

The Gazette invites reader questions on tax and investment matters. If you’d like your query addressed, send it to Paul Delean, Gazette Business Reporter, Suite 200, 1010 Ste. Catherine St. W., Montreal, Que., H3B 5L1, or by email to pdelean@ montrealgazette.com.

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