Canadians in Hawaii
Although you are busy with the details of your move and your job, do not overlook some important tax details. The income tax system in the United States is very different from the Canadian system. It is complex and confusing to Canadians who move here and work. Let a Canadian accountant and tax expert with many years of experience with both Canadian and USA taxes help you.
Things to do now to minimize taxes later:
STEP 1: Reduce tax on Rental Income from Canada
A non-resident of Canada must pay 25% withholding tax on all gross rents received. This tax can be reduced to 25% of net rental income by having your agent file a Section 216 election with CRA before the start of each year, and by filing a Section 216 tax return each year. Nearly everyone in this situation can greatly reduce or eliminate the tax on rental income by making the Section 216 election.
STEP 2: Obtain Social Security Numbers / Individual Taxpayer Identification Numbers
You will be taxed by the US and Hawaii on any employment earnings here. You may be able to reduce any tax payable by claiming a spouse, dependents, or credits such as the child tax credit or the child care credit. However, you may only claim these if your spouse and dependents each have a Social Security Number or an Individual Taxpayer Identification Number. It may take a long time to obtain these numbers. Therefore, it is very important to apply for these numbers as soon as possible. I can help you with filing the correct application forms.
STEP 3: Avoid Double Taxation
You may be able to avoid being double taxed by Canadian and US/Hawai`i governments on the same income. Depending upon your circumstances, you may be able to claim foreign tax credits, a foreign income exclusion, or protection under the Canada-US Income Tax Convention. You may have several filing options that may greatly reduce your taxes. This is a very complex area of taxation because each individual situation may be different. Minimizing your taxes requires careful analysis of your individual facts and circumstances.
STEP 4: File Tax Returns on Time
You must file your tax returns on time to be able to claim most tax credits. The United States filing deadline is generally April 15, and the Hawaii filing deadline is generally April 20. That’s right – you must file separate tax returns for the United States and Hawaii! Most professional tax preparers are extremely busy in the last month before the deadlines, so it is important to start preparing your tax returns as early as possible. Because your individual situation depends upon so many different factors, it is impossible to give you reliable advice without a careful analysis of your individual facts and circumstances. This analysis should occur well in advance of any tax preparation, in some cases even before you move to Hawaii.
I do not charge for any initial consultation with any client.