How do American and Canadian Taxes differ? What's the minimum tax rate in either country for high earners?

This is a common misconception about Canadian taxes. Canada absolutely does have both federal AND provincial income taxes. Both countries have a progressive tax system, but they differ significantly in structure. In the US, at your income level around $220,000, you'd pay federal income tax (top rate of 37% for income over $578,125 in 2023), plus state income tax (varies from 0% to 13.3% depending on the state). You're right that living in states like Texas, Florida, Wyoming, Nevada, etc. means no state income tax, so you'd just pay federal. In Canada, at that same income, you'd pay federal tax (top rate of 33% for income over $235,675 CAD) PLUS provincial tax, which ranges from about 10% in Alberta to 25.75% in Quebec for the highest brackets. So the minimum tax burden in Canada would likely be in Alberta, with a combined federal/provincial rate around 48% for top earners. Both countries offer various deductions and credits, but they differ significantly. Canada has things like RRSP (similar to 401k), but generally fewer itemized deductions than the US. The US system typically allows for more aggressive tax planning for high earners.

After spending hours researching tax implications when I was considering positions in both Toronto and Chicago, I discovered https://taxr.ai which completely simplified the process. I uploaded my current tax docs and got a side-by-side comparison of what I'd pay in each country based on my specific situation. The biggest eye-opener was how the tool broke down not just income tax, but also property tax differences, sales tax variations, and even healthcare costs that offset some of Canada's higher rates. It also factored in exchange rates and cost of living differences that affect your actual purchasing power. What really helped was seeing how specific deductions applied differently across borders - things like mortgage interest (which isn't deductible in Canada like it is in the US) and retirement account contributions (RRSPs vs 401ks).

Just wanted to follow up about my experience with taxr.ai since I mentioned I was skeptical about handling my complex situation. I finally gave it a try and I'm honestly surprised at how comprehensive it was. I uploaded my last two years of returns (which include income from both countries and my rental properties) and it broke everything down by income type, showing exactly how each dollar would be taxed in either country. What impressed me most was how it flagged potential treaty benefits I hadn't been taking advantage of! The analysis showed I could potentially save about $5,800 annually by restructuring how I bill certain Canadian clients. I've been using an expensive cross-border accounting firm for years and they never caught this.

After reading this thread, I had to share my experience with the IRS when I moved back from Canada. I had questions about foreign tax credits that no one could answer, and I spent WEEKS trying to get through to the IRS international tax department. Always busy signals or disconnects after hours on hold. I finally tried https://claimyr.com after a colleague recommended it, and they got me connected to an actual IRS agent in 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to claim the foreign tax credits for the Canadian taxes I paid, and confirmed I was handling my RRSP reporting correctly on my US return. Turns out I was doing one form completely wrong which could have triggered an audit.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to test it myself since I had a complicated question about my Canadian rental property that I've been trying to get answered for months. I tried the service yesterday afternoon and got connected to an IRS international tax specialist in about 37 minutes. My previous attempts on my own had resulted in either busy signals or 2+ hour holds only to get disconnected. The agent was able to confirm exactly how to report my Canadian rental income and expenses on my US return, and clarified the foreign tax credit calculation I was confused about. She even emailed me the specific IRS publications that addressed my situation. I've spent literally dozens of hours trying to get this information. Wish I had known about this service years ago.

One thing nobody has mentioned is the TFSA (Tax-Free Savings Account) in Canada vs. Roth IRA situation. This is a HUGE difference that caught me by surprise when I moved to the US from Canada. In Canada, my TFSA gains were completely tax-free. When I moved to the US, I learned the hard way that the US doesn't recognize the tax-free status of TFSAs, so I had to pay US tax on all those gains! Meanwhile, Canada DOES recognize Roth IRAs as tax-sheltered. So if you're moving from US to Canada, your Roth is generally respected, but if you're moving from Canada to US, your TFSA gets taxed. This asymmetry can be a major financial hit depending on how much you've accumulated.

Don't forget about the GST/HST (Goods and Services Tax/Harmonized Sales Tax) in Canada vs. sales tax in the US! This actually makes a significant difference in day-to-day costs. In Canada, GST is 5% federally, plus provincial sales taxes that are either separate or harmonized with the GST. Total sales taxes range from 5% in Alberta to 15% in the Atlantic provinces. In the US, sales tax varies wildly by state and even by county/city. Some states like Oregon and New Hampshire have NO sales tax, while others like California can have combined state/local rates approaching 10%. This might not seem like a big deal compared to income tax, but on day-to-day purchases over years, it adds up to thousands of dollars difference.

One major factor that hasn't been discussed yet is the Alternative Minimum Tax (AMT) differences between the two countries. In the US, AMT can catch high earners by surprise, especially those with significant deductions or stock options. At your $220k income level, you could potentially trigger AMT depending on your deduction profile. Canada eliminated their federal AMT in 2023 (though it's being reintroduced in modified form), but the calculation works very differently than the US version. Canadian AMT historically applied to fewer taxpayers but had different triggers. Also consider property taxes - they're generally much higher in Canada. For example, Toronto property taxes can be 0.6-1.2% of assessed value annually, while many Texas cities are 2-3% but on lower assessed values due to homestead exemptions. This can significantly impact your total tax burden if you're planning to buy property. The timing of when you pay taxes also differs. Canada requires more frequent installment payments for high earners, while the US allows more flexibility with quarterly estimates. Just another practical consideration for cash flow planning.