Most people can answer easily when asked where they lived on December 31. But there are some situations that can make determining your formal province of residence more difficult.
For tax purposes, you are subject to provincial tax in the province with which you had the most significant residential ties as of December 31. And it may not be the same province you were physically present in on New Year’s Eve.
With the job boom in Alberta, many Atlantic Canadians are travelling back and forth to jobs sites. And many of them have claimed Alberta has their province of residence. However, the Canada Revenue Agency recently reassessed a large number of taxpayers for incorrectly claiming their province of residence and, typically, they were Atlantic Canadians.
Claiming your province incorrectly can have a major impact on your tax bill. For example, a taxpayer earning $100,000 and claiming a spouse or common-law partner pays approximately $6,000 more in provincial tax as a resident of Nova Scotia than as a resident of Alberta.
Remember, the CRA considers a taxpayer to be resident in a province where significant residential ties exist. This would include a dwelling place, spouse and common-law partner and dependants. So if you own a home in New Brunswick and your spouse and children all live in the home, those are significant residential ties even if you were working outside of the province on December 31.
Students are another group that may have difficulty determining their province of residence. A single student with no dependants who attends school in another province will normally be considered a resident of the province in which he or she rents an apartment. The apartment is a dwelling place and constitutes the student’s only significant residential tie.
However, if a student is living in temporary accommodation, such as a student residence, secondary ties would need to be considered. This would include the location of their personal belongings, health insurance and driver’s license.
Being asked where you live seems like such a simple question, but at tax time it takes on extra complexity, and the conclusion you reach can have significant implications for your tax bill.