How do I determine my province of residence for tax purposes?

Gena Katz, a chartered accountant and principal with Ernst and Young, has the answer.

Gena Katz 13 January, 2004 | 2:00PM
Dear Expert:

I moved to Quebec from Alberta over the Christmas holidays. I have a lease on my new apartment in Montreal but still own my former home in Calgary--although I expect to accept a purchase offer on it this week. My last day at my Calgary job was Dec. 19, and I start at my new position in Montreal on Jan. 5. My total employment income in 2003 was $92,000. My only investments are within my RRSP, so apart from some nominal bank-account interest I had no other income in 2003. My question is: Do I have a choice as to what I report as my province of residence on my income tax return? How much of an advantage, dollar-wise, would there be to saying I still lived in Alberta as of December 31?

Expert Answer:

Generally, an individual is required to file his/her annual tax return and compute income tax based on the province or territory of residence on December 31 of that year. The selection of province of residence is not a choice; it is based on location of your most significant residential ties. Such ties include the location of your home and personal property, where your spouse/common-law partner or dependants reside, social and financial ties. In the case of a move from one province to another, the commencement of residence in the second province is often the date of the physical move; however if you have maintained ties in the first province, this is not necessarily the case.

Interestingly, you have moved from the province with the lowest tax rate, Alberta, to one of the most highly taxed provinces, Quebec. Based on $92,000 of taxable income, without considering any credits or deductions, other than the personal credit, CPP and EI, your 2003 tax liability would be approximately $25,000 in Alberta and $32,000 in Quebec.

Based on the information you have provided, it is not clear which is your province of residence at December 31. If your move to Quebec was essentially complete by the end of 2003 and you did not return to Calgary over the holidays to spend time with family or clear financial affairs, you would likely be considered a resident of Quebec at the end of the year and will be required to file both a federal T1 return and a Quebec TP1 return for 2003.

To find out how much an RRSP contribution may save you, try Morningstar's RRSP Calculator.

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Gena Katz

Gena Katz