I've generally been in favor of progressive taxation, following the established economic consensus that high taxes on the wealthy is socially optimal. (I would prefer this were focused more strongly on Pigouvian and land taxes rather than income and property taxes, but in the absence of that option I guess I'll take income taxes.)
Of course, I've been effectively unemployed for the first ~10 years of my adult life, so it's easy to talk big about taxing others. Now that I have a real job, I just looked up my new tax bracket and WTF THE GOVERNMENT IS GOING TO TAKE 35% OF MY MONEY‽
Market resolves in 5 years based on whether I become significantly more opposed to income taxes on people who make the same amount of money as I do. My stated reasons for this are irrelevant.
1,000Since this comments section appears to have become a tax advise thread... Ok, so what's the best way to get around the fact that only donations to US charities are tax-deductible? I could ask my employer to donate for me, but brief research shows Canada might just treat that as "income" still. I could form a Canadian charity and donate to that, but again I think Canada thought of that and it only works if their money is being spent directly, I can't just re-grant to a US charity.
Oh yeah, on this note, I would love recommendations for a good tax accountant. They're easy to find in general, but when I say I want people who are familiar with startup equity, and with both US and Canadian tax law, and are comfortable giving probabilities in their answers to me, it gets a lot harder.
Found someone but they're not being all that helpful.
They also informed me that despite being a US citizen and working for a US company, I'll be taxed under the Canadian regime, so I'll actually be paying closer to 45%. Ahhhhhhh.
Desire to move back to the US intensifies...
@IsaacKing oh no, I wasn’t talking about charitable deductions, your bread and butter will be workplace expenses. But yeah do charitable, news subscription, political deductions, and all other kinds of em. If you’re Canadian, you can do TFSA, RRSP, RESP, and all that.
Also i don’t think you need an accountant, you just need a 1 hour sit down with someone who knows some stuff i suspect and you’ll save thousands.
@Magnify I don't really see how those will add up to a significant amount? I work from home and am not going to have significant workplace expenses, TFSA is limited to 7k a year (and contributions aren't deductible, it just lets me invest without capital gains taxes), RRSP is limited to 30k a year and is only useful for long-term savings since withdrawals are fully taxed, and RESP doesn't matter if I don't plan to have kids.
@IsaacKing have a friend create a Canadian non-profit company that sends all its money to foreign non-profits (joking)
@IsaacKing ah but that’s even better! When you WFH you get to deduct a portion of your rent, your wifi, your electricity costs, all home office stuff you employer is intended to provide. The scope of what can be deducted is huge. Keep receipts for everything.
@IsaacKing Assuming you're a dual US-Canada tax resident, I got the impression that having a TFSA as a US tax resident is a bad idea because of the PFIC paperwork and the fact that TFSA investments are taxable (at the top marginal rates, because it's a trust) in the US.
@IsaacKing ok a few more tax notes
Canadians can sometimes deduct donations to US charities, up to 75% of their income "arising in the United States" (per Article XXI of the US-Canada tax treaty), but there are a few very non-obvious subtleties with this rule
I WFH full-time and I tried to apply the rules as faithfully as possible and ended up calculating that I can deduct 15.302% of my rent. If you're a little more flexible with how you interpret tax law you could probably come up with a bigger % than me though.
"all home office stuff you employer is intended to provide" → you can deduct employment expenses that you incur, but you can't double dip and claim employment expenses that are reimbursed by your employer
The way the shell corporation works is instead of working for your employer as an employee, you form a corporation and bill your employer through the corporation (which would be an independent contractor of your employer). Then you have the shell corporation employ yourself and pay you the wages you need for your ongoing expenses, leaving the rest in the corporation. This kinda lets you use the corporation like an RRSP, since you can wait until you have a lower marginal tax rate before taking money out of the corporation (as wages or dividends), although you do have to pay the 9% corporate tax on profits (the wages you pay yourself from the corp count as expenses that reduce your profit though). The downside is that "personal services businesses" - corporations that are effectively incorporated employees - are subject to extremely punitive tax rules, to prevent this exact situation from working. So you'd have to convince the CRA you aren't a PSB, which would be hard because you factually would be a PSB.
@Magnify What proportion? Seems dishonest to claim my mortgage is a work expense given that I would have to pay it either way.
In any case even if I could deduct 100% of all my living expenses, that's less than 5% of my income, so it doesn't make much of a dent.
@IsaacKing generally whatever percentage of square footage is used for home office. For me in a1br a while ago it was about a third.
Also, either your living expenses are ridiculously low or your yearly income is absurd. Assuming a $2000/month mortgage alone, you’re making minimum 480K? But you said living expenses, not mortgage being under 5%
Regardless. It’ll make a bigger impact than you’re expecting. It’s taking off the 5% that’s getting taxed the highest
@loops Yeah I don't really see what the benefit of the shell corporation would be in my situation, doesn't seem like it would save me much.
@Magnify My monthly mortgage is about $300. House in a low-cost area, split with my partner and we rent to a third.
@IsaacKing ah ok that makes sense. So what you do here, is you create a corporation, put the house under the corporation, and reinvest all the rental income back into the corporation. Then you should be able to put a ton of your salary into this corporation (it should tax defer but I don’t know your jurisdiction) and that corporation just makes money and buys houses to rent em out.
@loops Ok this is weird. Looking at the definition of a PSB, I certainly would be one if I did what you suggest. But if I made two businesses, and I control one, which controls the other, which works for the ultimate employer, than the first business fails bullet point #4, and the second fails bullet point #2, thus neither is a PSB.
...Surely this wouldn't actually work?
@IsaacKing The second business wouldn't fail bullet point #2. A specified shareholder is someone who "directly or indirectly owns at least 10% of the issued shares", and you would indirectly own 100% of the second business (because you own the first business, which owns the second business). So the second business would be a PSB. (The first business would not be a PSB.)
@loops Ahhh, I see, whoops.
I'm technically a consultant, not an employee, so this might be sufficient to get me out of being a PSB? Since I wouldn't be "reasonably considered an employee".
If that doesn't work, I guess the only way to get out of being classified as a PSB would be to hire 6 other people to work for me. They just need to break even to cover their wages, which shouldn't that that hard, right...?
@IsaacKing If you're a consultant the PSB rules wouldn't apply. But you determine if you're a consultant or employee based on the actual nature of your relationship with your payer, not what the contract you signed calls the relationship. (Also, your employer would need to be okay with contracting with your corp instead of you.)
(As a side note, if you are a consultant you would have to register for GST/HST. You wouldn't actually charge it to your client since there's no HST on consulting services provided to non-residents but you would still have to register.)
@loops Do you wanna be my tax accountant lol? So far you're better than all the people I've found online.