What if you can reduce taxes and fill your life with new experiences at the same time? If you think that it is not possible, think again, and this is not just about the new experiences you can pay for with the extra money in your pocket from saving on taxes, although that might be a plus. What this is referring to is moving to a place with lower-income taxes, so it is not just moving to another city close by, but to another city in a different province or territory in the context of Canada which this will focus on. What better way is there to gain a totally new experience than to move away to a totally new environment and benefit financially from it! This might be an ideal income hack or even career hack for those of the new generation that are all about finding novel experiences.
Of course for how much you might actually end up saving, you will have to consider the difference in all the other taxes that each province or territory has and the cost of living there that can impact your quality of life, but that is another topic by itself. Here, we will just focus on income tax, the one that directly affects how much you put in your pocket. Just a note, I am not a tax expert so this is just an observation made which can be applied to help reduce your income tax while generating new experiences for you. I recommend that you seek a tax expert to find out the actual tax impact based on your personal situation.
Below are several comparisons between provinces and territories in Canada on the 2014 average income tax percentage you will be paying for a given sample of gross incomes.
Top 4 Canadian Cities Income Tax Comparison
If like most people, you will only consider moving between the top 4 cities in Canada: Toronto, Montreal, Vancouver, and Calgary, here are the provinces with the lowest tax highlighted at each income level.
Basically, if you make under $10,000 per year, Montreal is the obvious choice. If you are just starting off making income whether you are a new immigrant, doing part-time or is just in the lower-income bracket below $30,000, the best choice would be in Calgary. If you are between $40,000 to $60,000 where most post-secondary graduates start of in then Toronto will be your best choice. As you progress from there in your career, making $60,000 to $100,000, Vancouver will be the best choice. Now, when you are making the big bucks with $100,000+ annually, then Calgary will be the obvious choice again.
Western Canada Income Tax Comparison
For those that only want to stick to the west side of the country, here are the provinces with the lowest tax highlighted at each income level.
In Western Canada, it is basically a battle between the two most Western provinces: British Columbia and Alberta. Essentially, if you are in the lower and upper income brackets, below $50,000 and $100,000+, then Alberta will be the best choice. The only time BC will be the best from an income tax standpoint is when your income is between $60,000 and $100,000, and the difference is still not that big compared to Alberta. Manitoba is the worse from a tax perspective across all income levels out of the four.
Eastern Canada (Maritimes) Income Tax Comparison
For those on the other side of the country in the East, here are the provinces with the lowest tax highlighted at each income level.
In Eastern Canada, if your income is below $10,000, it does not matter which province you are in. Any income higher than that, Newfoundland is the clear winner with the lowest tax across all the income levels and New Brunswick comes in second.
Central Canada Income Tax Comparison
Living at the centre of the universe, or just of the country? Here are the lowest taxes highlighted at each income level between the two central provinces.
In Central Canada, Ontario trumps all in terms of income tax across most income levels except for below $10,000.
Territories Income Tax Comparison
Not to forget those up in North and the extremely cold parts of Canada, here are the territories with the lowest tax highlighted at each income level.
Up in the Territories, Nunavut takes the crown for the lowest income tax all around except for when you are below $10,000, which is where the Northwest Territories will be your best bet.
Canada-wide Income Tax Comparison
If you are willing to span all of Canada in your search for the lowest taxed place for your income to work in, here are the provinces and territories with the lowest tax highlighted at each income level.
The clear winner for the place with the lowest income tax across most income levels is Nunavut. So for those who are making between $10,000 to $175,000 a year, which should be a lot of you, do consider moving to Nunavut for work from an income tax standpoint assuming you can find work there and make back the same level of income. If you are below that range, lower than $10,000, then go to Quebec. For those with very high incomes out there with more than $175,000, consider living in Alberta, your wallet will thank you for it.
I understand not everyone can take advantage of more favourable income tax treatments between cities, provinces or territories, at different points in their career, and that is fine. People have family and friends they do not want to leave, or skills that are not as in demand or transferable from place to place, or many other reasons. Everything here is only to make you at least aware of the tradeoffs you are making, from a tax or extra money in your pocket perspective, compared to those other things in your life. Those other reasons may be more than worth the tradeoff in your mind compared to the taxed amount you are giving up and that is totally a personal choice.
For those of you who are in the fortunate position to take advantage of this tax arbitrage opportunity: freelancers, those employed by national companies with various locations, self-employed people, or many others, I hope this can help open up a choice for you to consider.
Would you consider moving locations for tax reasons and put more money in your pocket?