Yes, US citizens can be subject to double taxation because the United States is one of the few nations that taxes based on citizenship (worldwide income) rather than just residence. While you must report all global income, tools like the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC) usually prevent actually paying taxes twice to two different governments.
While you'll pay Canadian taxes on your worldwide income as a Canadian resident, the U.S.-Canada tax treaty, combined with the Foreign Tax Credit and Foreign Earned Income Exclusion, typically eliminates any U.S. tax liability. The challenge isn't paying double taxes—it's filing correctly in both countries.
You will avoid double taxation by the use of foreign tax credits that you claim on either the US or Canadian tax return. You should consult a tax professional to help guide you through this process - there is some degree of optimization you can achieve depending on facts and circumstances.
The United States remains one of only two countries in the world that taxes worldwide income on a citizenship basis and not on a residency basis, like the majority of the world does.
Regardless of the path taken, dual citizenship creates ongoing tax obligations – US law requires citizens to file a tax return each year on worldwide income, even when living abroad or using a second passport.
While the U.S. can legally tax you twice on the same income, most American expats never pay taxes twice. The IRS provides powerful tools like the Foreign Earned Income Exclusion and Foreign Tax Credit that eliminate or significantly reduce double taxation for Americans living abroad.
Yes, you can have dual citizenship in the U.S. and Canada, as both countries permit it, allowing you to enjoy rights and responsibilities in both nations, though it does come with tax obligations in both countries and the requirement to use the appropriate passport when entering or exiting each country. You don't need to apply for "dual citizenship" itself; it's a result of meeting the citizenship criteria of both nations, such as being born in one to a citizen parent of the other, or through naturalization.
In 2022, Canada was ranked 22nd out of the 38 OECD countries in terms of the tax-to-GDP ratio. 1. In this note, the country with the highest level or share is ranked first and the country with the lowest level or share is ranked 38th.
There are several strategies that can be used to avoid or minimize US double taxation.
Do dual citizens pay taxes in Canada and the US? Yes, dual citizens may be required to pay taxes in both countries. If you're a dual citizen of the U.S. and another country, like Canada, you're taxed on your worldwide income by the U.S., no matter where you live.
Double taxation in Canada and US
Applying both Canadian and US tax laws can result in double taxation for corporations, citizens and residents of either or both countries (e.g., dual citizens).
U.S. Taxes: At a Glance. Canada generally has a higher overall tax burden than the United States. Canadians pay more in sales and provincial income taxes, while Americans often face lower income taxes but higher out-of-pocket costs for services such as healthcare.
Canada's 90% rule helps non-residents and recent immigrants claim full federal tax credits (like the Basic Personal Amount) if 90% or more of their net worldwide income for the relevant tax year is from Canadian sources; otherwise, credits are prorated (reduced) based on their Canadian residency period, ensuring fairness for those who weren't residents all year.
Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.
An American expatriate earning income in a foreign country might face international double taxation, as that income may be taxed both abroad and in the United States. This situation does depend on the tax treaties in place.
The IRS 7-year rule primarily applies to keeping records for claiming a deduction for bad debts or losses from worthless securities, allowing a longer period to file for a credit or refund, but it's not a universal audit limit; it's often a recommended safe buffer for general record-keeping, with the standard IRS audit period usually being 3 years, extending to 6 years for substantial income omission (over 25%) or foreign income issues, and indefinitely for fraud.
According to a new study published by the Fraser Institute, in 2024 the average Canadian family (including single people) paid $48,306 in total taxes. Given the average family's total cash income was $114,289 in 2024, this means families paid 42.3 per cent of their incomes in taxes levied by all levels of government.
For a $70,000 income in Canada (using 2025 rates), you'll pay roughly $13,000 to $20,000 in total taxes (federal, provincial, CPP, EI), depending on your province, resulting in a take-home pay around $50,000-$59,000, with federal tax around 14.5% or 20.5% depending on the portion, plus provincial tax and deductions like CPP and EI.
Becoming a U.S. citizen does not mean you have to give up your Canadian citizenship. You can keep your Canadian passport and remain a citizen of both countries.
U.S. law does not mention dual nationality or require a person to choose one citizenship over another. A person who is automatically granted another citizenship does not risk losing U.S. citizenship. However, a person who acquires a foreign citizenship by applying for it may lose U.S. citizenship.