Key things Canadians should know about earning US income, including tax implications and how to stay compliant.
More Canadians than ever are earning US income through remote work, investments, or cross-border business. While this creates great opportunities, it also brings unique tax considerations. Here’s what you should know to stay compliant and avoid surprises.
You May Need to File Taxes in Both Countries
The first thing to understand is that earning US income doesn’t automatically mean double taxation. The Canada-US tax treaty helps prevent this, but you’ll still need to:
- Report all worldwide income to the CRA
- File a US tax return if you meet certain thresholds
- Claim foreign tax credits to avoid paying twice
The rules differ based on whether your US income comes from employment, self-employment, or investments.
Common Sources of US Income
Canadians typically earn US income through:
- Remote work for US companies
- Consulting or freelance services
- Rental income from US properties
- Dividends from US stocks
- Business profits from US operations
Each type has different reporting requirements. For example, US clients might withhold 30% of payments unless you provide a W-8BEN form to reduce withholding taxes.
Don’t Forget About State Taxes
Many Canadians focus on federal taxes but forget about state obligations. If you:
- Work remotely for a company based in a state with income tax
- Own rental property in certain states
- Have a business nexus in any state
You might need to file state tax returns too. States like California and New York are particularly aggressive about collecting taxes.
How to Stay Compliant
The key to managing US income is organization:
- Keep clear records of all US-source income
- Understand which tax forms you need (1040NR, W-8BEN, etc.)
- Track foreign tax credits to avoid double taxation
- Consider currency exchange rates when reporting
At IDM Professional Accounting, we specialize in helping Canadians navigate the complexities of earning US income. Our cross-border tax experts can ensure you meet all requirements while maximizing your after-tax earnings.
Need help with your US income tax situation? Contact IDM today to book a consultation.
