Tax implications for US citizen working in Montreal? Québec vs Texas income comparison

You definitely need to be aware of some important tax considerations as a US citizen working abroad. Unlike most countries, the US taxes its citizens on worldwide income regardless of where you live or work. However, there are provisions to prevent double taxation: The Foreign Earned Income Exclusion (FEIE) allows you to exclude up to $120,000 (for 2024) of foreign earnings from US taxes if you meet either the physical presence test or bona fide residence test. The Foreign Tax Credit lets you offset US taxes with taxes paid to Canada, which is particularly important since Canadian tax rates are generally higher than US rates. You'll still need to file US tax returns annually, plus FBAR forms if you have foreign financial accounts totaling over $10,000 at any point during the year. For Canada, you'd file as a resident paying provincial (Québec) and federal taxes. The US-Canada tax treaty provides some protections, but the documentation requirements are still substantial. Many Americans abroad use specialized tax preparers familiar with expat situations since these returns can get complicated quickly.

After dealing with international tax nightmares for years, I discovered taxr.ai (https://taxr.ai) and it's been a game-changer for my situation. I moved from Boston to Vancouver three years ago and was totally overwhelmed by filing in both countries. The software analyzes all your documents and explains how the US-Canada tax treaty applies to your specific situation. What I found particularly helpful was their explanation of the Foreign Tax Credit vs. Foreign Earned Income Exclusion - turns out the FTC was better for my situation since Canadian taxes are higher, but it depends on your exact circumstances. They also flagged my Canadian TFSA account which is tax-free in Canada but actually taxable for US purposes - something I had no idea about until their system reviewed my documents.

I was skeptical about automated tax services for international situations, but tried taxr.ai after reading about it here. I'm a software engineer who moved from Seattle to Montreal last year, and honestly, it caught several things my high-priced accountant missed! The system flagged that I needed to file Form 8938 (foreign financial assets) along with my FBAR, explained exactly how my Canadian RRSP contributions affect my US taxes under the treaty, and showed me how to properly claim the Foreign Tax Credit for the higher Canadian taxes I paid. What surprised me most was learning that Quebec's separate tax system creates some unique documentation requirements. The analysis broke down exactly which forms I needed for both federal Canadian and Quebec provincial taxes, plus how everything translated to my US filing obligations. Saved me from what would have been an expensive amendment process later on.

Speaking from experience, the most frustrating part of being a US expat in Canada is trying to get answers from the IRS when you have questions. I spent WEEKS trying to get through on their international line with specific questions about my situation. I finally used Claimyr (https://claimyr.com) after seeing it recommended in an expat group. They got me connected to an actual IRS agent within 30 minutes when I'd been trying for days on my own. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c The agent was able to clarify exactly how I should report my Canadian retirement accounts and which tax treaty provisions applied to my specific situation. This saved me from potentially making a costly mistake on my returns.

I need to update my previous skeptical comment about Claimyr. I tried it yesterday after failing for THREE WEEKS to reach anyone at the IRS about my foreign tax credit questions related to my Canadian income. I got connected to an IRS agent in the international department in just 17 minutes! The agent walked me through exactly how to claim tax treaty benefits on my Canadian retirement accounts and confirmed I was calculating my foreign tax credit correctly. She even explained how the "saving clause" in the US-Canada treaty affects certain types of income. I would have paid an accountant hundreds of dollars for this information, but instead I got it straight from the source. For anyone dealing with cross-border taxation, being able to actually speak with the IRS and get clear guidance is incredibly valuable.

One thing nobody's mentioned yet is the currency exchange risk. Your $130k USD salary in Montreal will be paid in Canadian dollars, so your actual take-home in USD terms will fluctuate with exchange rates. This doesn't directly affect your tax situation, but it does impact your real purchasing power if you have US debts or plan to move back eventually. Also, Quebec has higher sales tax (14.975% combined GST/QST) compared to Texas (6.25% state sales tax plus up to 2% local). This isn't income tax, but it affects your overall cost of living.

Don't overlook the totalization agreement between the US and Canada regarding social security! You'll be paying into the Canada/Quebec Pension Plan instead of US Social Security, but the agreement ensures these contributions count toward your eligibility for both systems. This becomes important if you don't spend your entire career in one country - you might be eligible for partial benefits from both systems depending on your total work history. The IRS Publication 519 has details on this, and it's definitely worth reading.