If you’ve lived or worked in both the U.S. and Canada, where should you retire from a tax perspective? In this video, we break down a detailed side-by-side comparison of retirement taxes in the United States and Canada, analyzing three income levels for married couples. The results may surprise you. We cover:
• How married couples are taxed differently in the U.S. vs. Canada
• Why Social Security income is often treated more favorably in the U.S.
• How tax savings vary at lower, middle, and higher retirement income levels
• Why the U.S. tax advantage narrows in the middle — but expands again at higher incomes
• The hidden costs retirees must consider (healthcare, property taxes, sales tax, and more)
But taxes aren’t the only factor. Healthcare costs can materially offset U.S. tax savings. Real estate taxes and sales taxes also play a role in the total retirement picture. If you’re a Canadian who has lived or worked in the U.S., or an American with Canadian ties, this analysis will help you think more strategically about your retirement location.
Watch the video here:
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Summary
Retirement Taxation: U.S. vs Canada
We discuss the complexities of retirement taxation in both the United States and Canada. We note that while one might assume that higher taxes in Canada would always result in higher retirement costs, this is not always the case. Bryan explained that clients often face decisions about whether to retire in the U.S. or return to Canada, and he outlined three scenarios to illustrate the differences in taxation between the two countries. He emphasized the importance of considering various factors, such as family ties and financial benefits, when making this decision.
U.S. vs. Canada Retiree Taxes
Bryan presented a comparison of tax scenarios for married retirees in the U.S. and Canada, assuming equal incomes for both spouses and focusing on retirees aged 65 and older. He explained key differences between the U.S. and Canadian tax systems, including filing methods and tax advantages for Social Security income in the U.S. Bryan analyzed three scenarios: one based solely on Social Security, CPP, and OAS benefits, and two additional scenarios that included account withdrawals of $30,000 each from retirement accounts. The analysis showed significant tax savings for U.S. retirees in the first scenario, with savings over $6,000 compared with Canadian taxes, while the tax savings narrowed to about $5,000 in the middle-income scenario.
Tax Benefits of U.S. vs. Canada Retirement
Bryan discussed the tax implications of retiring in the U.S. versus Canada for individuals with different income levels. He found that lower-income retirees benefit the most from retiring in the U.S., while higher-income earners see a significant tax savings of around $20,000 per year. Bryan also mentioned that medical expenses should be considered when comparing the two options, as U.S. residents may need to pay for coverage that Canadian residents do not.
Retirement Taxes: U.S. vs Canada
Bryan discussed the tax implications of retirement for individuals over 65 on Medicare, noting that healthcare expenses can quickly offset tax savings. He compared U.S. and Canadian taxes, highlighting higher real estate taxes in the U.S. and lower sales taxes than Canada’s GST, which can exceed 15%. Bryan also mentioned that higher-income earners in Canada might face the elimination of OAS benefits in retirement, unlike in the U.S., where earnings do not affect OAS.
U.S. vs. Canada Retirement Benefits
Bryan discussed the financial benefits of retiring in the U.S. versus Canada, noting that clients often compare the two options. He explained that, based on research of hundreds of retirement plans for cross-border retirees, people tend to be financially better off in the U.S. due to lower taxes and cost of living, despite potentially higher medical costs. Bryan emphasized that while this information is helpful, it should not be the sole factor in deciding where to retire. His firm offers comprehensive cross-border retirement income planning services.
Over the last few decades or more, tax rates have gone down and down in the U.S. and so it is no surprise that someone in the U.S. comes out on top. However, as mentioned, the giant elephant in the room, is healthcare and insurance. My wife and I are on Medicare and premiums have increased in the last few years. But more than that, being on Federal Health Benefits Insurance (which the federal gov’t is supposed covering 70% of the costs) has caused huge premiums over the last few years. Paying over 8K in premiums for insurance that is secondary to Medicare. Also hope never to have to use it in a hospital setting because we all know the “usual, customary, blah, blah,” clauses mean that they will not cover much. There are no personal bankruptcies caused by health care bills in Canada.
Thanks, Tom