Do US Citizens Living in Canada Have to Pay Taxes?

Find out if US citizens in Canada must file US taxes and learn about tax credits and exclusions.

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Yes, you do need to pay US taxes if you are a US citizen or resident living in Canada. The US has a citizenship-based taxation system, which means you are required to file a US tax return and report your worldwide income, even if you live abroad. However, you may be eligible for credits or exclusions, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, to reduce your US tax liability.

FAQs & Answers

  1. What is the Foreign Earned Income Exclusion? The Foreign Earned Income Exclusion allows qualifying US citizens living abroad to exclude a certain amount of their foreign-earned income from US taxation.
  2. Do I need to file a US tax return if I only earn income in Canada? Yes, US citizens must file a US tax return and report worldwide income, even if earned solely in Canada.
  3. What credits are available to reduce US taxes for expats? US expats may benefit from the Foreign Tax Credit and the Foreign Earned Income Exclusion to minimize their US tax liability.
  4. How does US taxation work for Canadians living in the US? Canadians residing in the US are taxed based on their residency status, generally requiring them to file US tax returns on their worldwide income.