With tax season winding down for 2015, it’s time for a little reflection. This year I had an increase in the number of new clients that required both Canadian and American returns prepared. If you reference my site, you’ll notice I don’t actively post prices for my U.S returns. This is because many times I need to explain that because of the various individual circumstances it may be impossible to quote how much work is needed. Many states require filing of annual state taxes as well as federal. Also there is a variety of avenues to take to obtain the taxable income. There is a choice of AMT (alternative minimum tax) or Tax based on where you fall in the IRS Tax Tables. There is also a choice between itemized deductions and taking the standard deduction. And finally, lets not even talk about how many different forms and ways there are to calculate depreciation that are available.
The bottom line is that the U.S system has more tax advantages on many deductible items that cannot be claimed in Canada. This has the impact of lowering the individual tax rate. The trick is spending time and money to research, apply and weigh your outcomes. On a pro rata basis fewer U.S citizens prepare their own taxes than do Canadians. This is because of the complexity involved. This is also why Warren Buffet and other High Income earners wind up paying lower taxes on a % basis than someone earning 40k.
Taking a balanced approach, I am biased towards our tax system. Our simple and straightforward Tax Code along with our tax credit system provides a more even approach to taxation and shares the public burden more broadly. This means a slightly higher personal income tax but lower aggravation when it comes to tax time. Our Corporate rates are now lower than many combined Federal/State rates in the US, and with the advent of a higher TFSA limit, we are closing the gap on personal rates.