Many people are surprised at how much personal tax rates vary within Canada. When making the choice to move around within the country the provincial tax rate is not always considered.
Canadian residents pay tax in the province in which they are resident at December 31. There is no proration based on the number of months that you have lived in each province.
If you were living in Alberta all year and then move to Nova Scotia in the middle of December, you will pay Nova Scotia tax for the entire year. The Nova Scotia personal tax rates are higher than the Alberta rates, so you will owe income tax when you file your personal tax return.
The better strategy is to move from a high tax rate province to a low tax rate province late in the year, so that you will get a refund of the higher tax that was withheld during the year. Move from Nova Scotia to Alberta late in the year, not the other way around. If you are moving back from Alberta wait until January.
The question also comes up about how the decision about where a person is resident is made? Some situations are very clear. If you sell your house in Alberta and buy one in Nova Scotia then you become a Nova Scotia resident. Other considerations are where you are working, where you are paying rent, where your bank accounts are etc.
Consider your options, as there is no prorating of personal income tax, wherever you are living on New Year’s Eve that is the province that will charge you income tax for the whole year.
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