Mike

There’s a great board for info on US / Canadian taxes that I’ve found VERY useful (I file both my US and Canadian taxes on my own). You might want to check it out as it’s actually most useful during “down” times. A fellow that goes by “nelsona” is really knowledgeable in this area but be sure to read over old posts 1st…he can get kind of grouchy when questions are repeated. :)

http://forums.serbinski.com/viewforum.php?f=2&sid=b118410ee5bf3bfa438116d3a8fe30bb

One last thing, becoming a US resident is not an easy task and is something I would not rely on just to save a few bucks.

I’d look for other ways to reduce taxes, such as investing in appropriate dividend paying stocks or similar.

DAvid

Thanks for the great run-down. I moved to the US in January, so I now have an RRSP and 401k (amongst a small mess of other accounts) and I’m still learning the details. Right now my company matches 25% up to 6% of gross. So I just invested the 6% for the match and I put other money into the savings until I get to sit down with an accountant and figure out the details (like how much income tax I’ll be paying the Canadian government next year).

My personal preference is for the Canadian RRSP system (and the Canadian Tax system). The 401k was really just a piece of tax law that was added for a few large US companies with lobbying budgets. As companies dropped pension plans and discovered 401ks there was a mass rush, but the rules around the 401k were never designed for the role they’re currently serving. Throw in IRA and the Roth IRA and the Roth 401k and it’s really just a mess.

I honestly believe that they should just get rid of the 401k move to a model more like the RRSP/TFSA and the people I’ve spoken with seem to agree. The system is not user-friendly.

Then again, I’m not looking forward to tax-time either. You know how taxes are pretty simple in Canada? You start on page 1, fill in the little boxes and add up the numbers. If a Canadian accountant told me that he could save me an extra $400 on my return, I’d call BS, b/c there’s not really much there.

Well, by all accounts, this is not the case in the US. You have two options here: standard deductions (i.e.: return equal to last year’s averages, fill in income and taxes paid, your check is in the mail) or itemized. Anecdotal comparisons between my tax return experience and those of the “itemizers” seem to be pretty grim. Here, if somebody tells you they can save you $400 on your return, they actually mean it. Just keep your receipts.

*sigh* tax time is going to be “fun”!

They’re like 401ks but are fully taxable at the beginning, but are never taxed again (grow tax free and withdrawals are tax free). My company started offering it last month. The same deposit limits (15,500/20,500) apply as a traditional 401k and unfortunately the limits are for both combined.

Unfortunately most companies have pretty limited, high-fee choices in their 401k banks… but whenever you switch jobs you can transfer your entire balance to a self-directed brokerage (like vanguard). So there’s more freedom than it appears initially.

Again, I’m not sure how common it is but it’s likley dependent on the particular company you work for rather than any special circumstances. Just like in Canada, some companies have better defined contribution plans, pensions, etc than others.

I’m a big fan of the 401k as the mutual funds options in my plan are great (including Vanguard index funds) and the fees are significantly lower than comparable funds or even ETFs in Canada. I also have a trading account which I am able to keep 50% of all 401k money in (the others have to remain in select but good funds). I do own some individual US stocks in that account and don’t have to worry about taxation.

I keep all our US holdings in the 401k (in USD) and our Canadian holdings in my and my husbands RRSPs (CAD) so it works out rather well. International holdings are spread out between the two in both currencies.

Wow…not sure if you wanted all that info but there you have it! :)

Also, wrt to cannon-fodder’s comment, although mortgage deductibility is available to all home owners in the US, a large number of home owners in the lower to middle income range do not take the deduction as the standard deduction is more beneficial. It’s really the higher earners that benefit most from the mortgage deductibility issue (and they generally have the larger mortgages). So while I agree that mortgage interest deductibility would “put more expensive homes within the reach of current homeowners”, it may not necessarily “make housing affordable to a group of Canadians that otherwise could not” although I’m not sure how Canada would treat this (as we do not use a “standard deduction” and we also do not file jointly for spouses).

What we have seen in North America is as interest rates rise, housing affordability goes down. It slows down, and even reverses, the rise in housing prices.

If on July 1 the government immediately implemented the ability to deduct mortgage interest, that would make housing affordable to a group of Canadians that otherwise could not and in turn put more expensive homes within the reach of current homeowners. The demand would go up and so would the prices. Eventually, in my opinion, equilibrium would be reached and the net result would be similar affordability rates that we see today meaning the house prices would rise commensurately.

For the record I have three part series on the same topic (just so you don’t think I’m copying you). :) I compare RRSP to 401k, Roth IRA to TFSA and RESP to 529.

The Canadian retirement system is simpler and more flexible. Personally I like more flexibility but some people probably benefit from things like the 10% penalty for early 401k withdrawal since it might make them less likely to dip into their 401k.

Mike