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Q: Tax comparision between US and Canada ( Answered 5 out of 5 stars,   1 Comment )
Subject: Tax comparision between US and Canada
Category: Miscellaneous
Asked by: bojo1234-ga
List Price: $5.00
Posted: 08 May 2006 08:06 PDT
Expires: 07 Jun 2006 08:06 PDT
Question ID: 726542
I would like to compare tax implications between Detroit Metro Area, MI
and Windsor, Ontario, Canada. Detroit and Windsor are seperated by a
river and a US-Canada border. If I work in Detroit and and live in
Windsor, what kind of taxes I am paying: US Fedral, Michigan state,
Detroit City, Canada Fedral, Ontario Province, WIndsor city.
Subject: Re: Tax comparision between US and Canada
Answered By: boquinha-ga on 16 May 2006 21:57 PDT
Rated:5 out of 5 stars
Hello bojo1234-ga!

Here is the information that you?ve requested regarding the various
taxes you could pay in your situation. It is a pretty unique
situation, so it?s not exactly cut and dry. Although, from my
research, I have a feeling that there are many Windsor residents
working in Detroit. Here?s what I found.

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There is no escaping the U.S. Federal Income Tax, no matter where you
work or live. According to IRS Publication 514, Foreign Tax Credit for

?If you are a U.S. citizen, you are taxed by the United States on your
worldwide income wherever you live. You are normally entitled to take
a credit for foreign taxes you pay or accrue.?

As you are probably aware, the U.S. income tax laws and schedules are
extremely complicated, with the final assessed tax being dependent
upon your income, filing status, number of exemptions, deductions,
etc., etc., etc., . . . You can find the proposed 2006 income tax rate
schedules at the IRS website.,,id=150856,00.html

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If you work in Michigan, they?ll find a way to take their cut, as well.

?You must file a Michigan income tax return (MI-1040 and Schedule NR
for nonresidents and part year residents) and pay Michigan income tax
on salary wages and other employee compensation for work performed in

The Michigan state income tax rate is 3.90%, regardless of income
level, with adjustments made according to the number of personal
exemptions for which you qualify.

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Some cities in Michigan also levy an additional income tax upon those
who work within them. Detroit is one of these cities and assesses an
additional 2.55% income tax on city residents, and 1.275% on
non-residents of the city who work there.,1607,7-121-24321-7114--F,00.html

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Establishing residence in Canada would subject you to taxation in Canada, as well.

?A person who is a resident of Canada for any part of the year is
subject to Canadian income tax on their world wide income during the
time that they are a resident of Canada.  During the time that they
are not a resident of Canada, they will pay Canadian income tax only
on income earned from Canadian sources.?

The Canadian federal income tax rates vary from 15-29%, depending upon
your income level. You can find detailed rate tables at:

To determine your legal residence status in Canada, see the Canadian
Revenue Agency bulletin IT-221R3.

IRS Publication 514 mentioned above does discuss the Foreign Income
Tax Credit, and it appears that you would probably recover the income
taxes assessed by the Canadian government given your described

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According to Ontario Tax Code:

?An income tax shall be paid as hereinafter required for each taxation
year by every individual,
who was resident in Ontario on the last day of the taxation year.?

Ontario provincial income tax rates vary from around 15-32%, with
marginal rates between 22% and 46%, depending, of course, upon your
income level. A detailed table can be found at:

Again, IRS Publication 514 indicates that you would probably be able
to recover any taxes assessed by Ontario through the Foreign Income
Tax Credit.

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Windsor, Ontario levies a city property tax, which is calculated as
0.017 times the assessed property value (or 1.7%). This would be
required of all city residents. More information can be found at the
city website.

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I?ve mentioned some IRS publications that will be of value to a U.S.
citizen, living in a foreign country. Here are links to three of them.

Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad

Publication 514, Foreign Tax Credit for Individuals

Publication 597, Information on the United States-Canada Income Tax Treaty

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This should give you the information that you have requested. Good
luck navigating the complicated tax codes, and good luck with your
future endeavors! If you have any need of further clarification,
please let me know how I can help.


Search terms:

Canada tax rate
Ontario tax rate
Windsor Ontario
Federal tax rate	
Michigan tax rate
Ontario income tax
bojo1234-ga rated this answer:5 out of 5 stars
Reallly great answer for the price.

Subject: Re: Tax comparision between US and Canada
From: boquinha-ga on 18 Jul 2006 13:39 PDT
Thank you for the comment and 5 stars!


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