With the spectre of the Parti Quebecois’ higher personal income tax rates looming large for 2013, some homeowners may be considering moving across the border into either Ontario or New Brunswick in order to take advantage of those provinces’ lower personal tax rates. It’s not a bad idea if you and your family are willing to pick up and go… there is definitely money to be saved. On income of $150,000, in 2013 a taxpayer will pay $59 720 in Quebec, $51 241 in Ontario and $50 835 in New Brunswick (based on 2012 income tax brackets).
Other clients have suggested that it would be a good idea to rent a small apartment just over the border and call that their principal residence, thereby “tricking” the system into allowing them to pay their provincial taxes to one of our neighbouring provinces. That’s not such a good idea, for a number of reasons.
The Canada Revenue Agency and Revenu-Quebec are watching situations like this very carefully, knowing full well that there is a definite temptation out there to try to fool the system. Over the years, tax courts have consistently deemed that the province of residence is determined by the sum total of a taxpayer’s residential ties. The courts consider such issues as: days spent in each location, location of employment, location of children’s schools, the location of banking arrangements, which province provides medical coverage, driver’s licenses and car registrations, and the location of family and friends.
Furthermore, declaring an out-of-province apartment as your principal residence exposes the eventual sale of your Quebec property to tax on capital gains – a sale which would otherwise have been tax free if that property had continued to be your principal residence.
If you’re serious about making the move, the brokers at Deakin Realty can help sell your Quebec property, and can recommend high-quality brokers in your destination city. We can also advise you on the tax implications of your move, and help you use your moving expenses tax deduction to your greatest benefit. Don’t hesitate to call us for more information!