U.S. Tax Preparation for Americans Living in Canada

Within the context of U.S. tax preparation in Canada, American citizens and green card holders should acknowledge that the IRS necessitates annual reporting of worldwide income, no matter where they live. In other words, Americans living in Canada should handle both their Canadian tax return and a U.S. filing.

Dimov Tax focuses on U.S. expat tax in Canada, presenting custom-tailored assistance that covers every detail—from reporting obligations and treaty benefits in line with the US-Canada tax treaty to asset disclosures like FBAR Canada and claiming exclusions like the FEIE Canada. With deep cross-border knowledge, our team makes sure our clients stay fully compliant and make the most of available tax relief provisions.

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Are U.S. Expats in Canada Required to File U.S. Taxes?

Yes. U.S. citizens and green card holders should generally perform an annual filing of the U.S. tax return (Form 1040), even if they live permanently in Canada. This means that Americans living in Canada taxes cover both Canadian and U.S. obligations.

Key Points

Annual Filing Obligation: A U.S. return is mandatory in addition to the Canadian return.
Worldwide Income Reporting: All wages, investments, pensions, and business earnings should be disclosed.
Relief Measures: The FEIE Canada, Foreign Tax Credit, and the US-Canada tax treaty can be helpful in limiting the double taxation.
Additional Reporting: Accounts in Canadian banks may generate FBAR Canada and FATCA filings.

U.S. vs. Canadian Filing Snapshot

Aspect	United States (IRS)	Canada (CRA)
Who Must File	All U.S. citizens & Green Card holders, regardless of residence	Residents of Canada with taxable income
Form Used	Form 1040 (U.S. Tax Return)	T1 (Individual Income Tax Return)
Income Scope	Worldwide income	Canadian-sourced & global income if resident
Deadline	April 15 (automatic extension to June 15 for expats)	April 30 (June 15 if self-employed)
Double Taxation Relief	FEIE, Foreign Tax Credit, U.S.–Canada tax treaty	Foreign tax credits for U.S. taxes paid
Foreign Account Reporting	FBAR Canada, FATCA (Form 8938)	Form T1135 if foreign property > CAD $100,000

Canadian Tax System Overview

Feature	Canada (CRA)	United States (IRS)
Tax Authority	CRA (Canada Revenue Agency)	IRS (Internal Revenue Service)
Tax Year	January 1 – December 31	January 1 – December 31
Filing Deadline	April 30 (June 15 if self-employed)	April 15 (automatic extension to June 15 for expats)
Income Scope	Global income if resident	Worldwide income for all citizens & Green Card holders
Federal & Local Taxes	Combined federal and provincial rates	Federal plus potential state income tax
Social Contributions	CPP/QPP (Canada Pension Plan / Québec Pension Plan)	Social Security & Medicare
Sales/Consumption Tax	GST/HST (Goods & Services / Harmonized Sales Tax)	Varies by state; no federal sales tax
Relief for Double Tax	Foreign tax credits for U.S. taxes paid	Foreign Tax Credit, FEIE Canada, U.S.–Canada tax treaty
Foreign Account Reporting	Not required for non-Canadian accounts	FBAR Canada, FATCA (Form 8938) if thresholds met

Avoiding Double Taxation

It is true that one of the main concerns for Americans living in Canada taxes is the risk of being taxed twice on the same income. U.S. expats can leverage IRS provisions and the US-Canada tax treaty in order to reduce or fully eliminate this issue with proper planning. These tools are central to effective U.S. tax preparation in Canada.

Key Relief Options

Provision / Agreement	How It Helps Expats in Canada
Foreign Earned Income Exclusion (FEIE Canada)	Allows qualifying expats to exclude up to $130,000 of earned income from U.S. taxation in 2025.
Foreign Tax Credit (FTC)	Credits Canadian income taxes paid against U.S. liability, reducing or eliminating double taxation.
US-Canada Tax Treaty	Defines which country has the right to tax specific types of income and presents additional relief.
Totalization Agreement	Coordinates U.S. Social Security with Canada’s CPP/QPP system so workers do not contribute to both.

Why This Matters

Both countries tax global income, so relief provisions ensure fairness.
Preferring between FEIE Canada and the Foreign Tax Credit varies in parallel to the income type and long-term situation.
The US-Canada tax treaty works alongside these measures for a comprehensive framework.

These safeguards form the backbone of smart U.S. expat tax in Canada planning, giving taxpayers peace of mind that their filings are fully compliant.

Foreign Asset Reporting (FBAR & FATCA)

Reporting income is not the only requirement in the context of U.S. tax preparation in Canada. Expats should also generally disclose their Canadian financial accounts to the IRS. For Americans living in Canada taxes. It usually means filing FBAR Canada and possibly FATCA.

FBAR vs. FATCA – Key Differences

Requirement	FBAR (FinCEN Form 114)	FATCA (Form 8938)
Who Must File	U.S. citizens, Green Card holders, and certain residents with Canadian accounts	U.S. taxpayers with foreign assets above IRS thresholds
Threshold	Aggregate balance of all Canadian accounts exceeds $10,000 at any time in the year	Single/MFS – $200,000 at year-end or $300,000 at any time; MFJ – $400,000 at year-end or $600,000 at any time.
Accounts/Assets Covered	Bank accounts, RRSPs, brokerage accounts, pensions, etc.	Bank accounts, securities, partnership interests, trusts, and other financial assets
Where to File	Electronically with the U.S. Treasury, not the IRS	Filed with the annual IRS tax return
Penalty for Non-Filing	Severe civil and possible criminal penalties	Substantial fines varies on asset value and intent

Special Canadian Investment Vehicles & Retirement Accounts

One of the most typical challenges is recognizing how Canadian savings plans are viewed by the IRS when managing U.S. tax preparation in Canada. It is correct that the US-Canada tax treaty presents relief for specific accounts. However, not all Canadian vehicles receive favorable treatment. This is important for Americans living in Canada taxes since reporting and taxation may be distinct from what the CRA requires.

Common Canadian Accounts and Their U.S. Treatment

Account Type	Canadian Treatment	U.S. Treatment
RRSP (Registered Retirement Savings Plan)	Contributions are deductible in Canada, and growth is tax-deferred until withdrawal.	RRSPs are recognized under the US-Canada tax treaty with automatic U.S. tax deferral (since Rev. Proc. 2014-55).
TFSA (Tax-Free Savings Account)	Growth and withdrawals are tax-free in Canada.	Not recognized under U.S. law. Treated as fully taxable, and income should be reported on the U.S. return.
RESP (Registered Education Savings Plan)	Contributions grow tax-deferred; withdrawals taxed to the student beneficiary.	RESPs and RDSPs are not treaty-protected and may be taxable for U.S. purposes. However, under Rev. Proc. 2020-17, many are exempt from Form 3520/3520-A reporting if they satisfy IRS ‘tax-favored trust’ criteria. FBAR/8938 may still apply.
RDSP (Registered Disability Savings Plan)	Government-assisted savings with tax-deferred growth.	Not treaty-protected. May require extensive U.S. reporting similar to RESPs.

Key Points for U.S. Expats in Canada

RRSPs are generally the safest option due to treaty protection.
TFSAs, RESPs, and RDSPs can create unexpected U.S. tax liabilities.
Accounts may generate FBAR Canada reporting if balances exceed $10,000 in aggregate.
Smart planning actions can be helpful in determining whether the FEIE Canada or the Foreign Tax Credit works better in combination with these accounts.

Handling Late Filings & Compliance

It should be noted that falling behind on U.S. filings is common for Americans living in Canada, particularly when balancing these two tax systems. Fortunately, the IRS establishes the Streamlined Filing Compliance Procedures to assist expats catch up.
What the Program Offers
- Penalty Relief: Custom-designed for taxpayers whose failure to file was non-willful.
- Coverage: Applies to overdue U.S. income tax returns and FBAR Canada filings.
- Lookback Period: Usually necessitates three years of U.S. tax returns and six years of FBARs.
- Certification: Taxpayers should certify that the oversight was not intentional.
- Outcome: Brings you into full compliance while limiting financial penalties.
Why It Matters for U.S. Expats in Canada
- The IRS simply expects worldwide income reporting, even if Canadian taxes are already paid.
- Relief measures like the FEIE Canada, the Foreign Tax Credit, and the US-Canada tax treaty can often be applied retroactively once filings are brought current.
- Streamlined filing makes sure that expats regain good standing without facing the harsh penalties normally linked with missed FBARs or returns.
This program is a vital safety net for anyone handling U.S. tax preparation in Canada after missing past deadlines.

Why Work with Dimov Tax?

Collaborating with the right partner for U.S. tax preparation in Canada is vital. Dimov Tax presents dedicated support for Americans living in Canada taxes and establishes full compliance with both IRS and CRA rules.

What Sets Us Apart

Area of Expertise	How Dimov Tax Supports U.S. Expats in Canada
Cross-Border Filing Knowledge	Seasoned in managing U.S. expat tax in Canada, aligning U.S. Form 1040 with Canadian returns.
Treaty Guidance	Advises on leveraging the U.S.-Canada tax treaty, covering elections that reduce or completely eliminate double taxation.
Exclusion & Credit Optimization	Assists in maximizing benefits in line with FEIE Canada and the Foreign Tax Credit to lower U.S. liability.
Foreign Asset Reporting	Establishes full compliance with FBAR Canada and FATCA rules, preventing penalty amounts.
Secure, Senior-Led Service	All work is managed confidentially by senior professionals with a client-centered approach.

Get Started

Preparing for U.S. tax preparation in Canada naturally begins with gathering the right documents. For Americans living in Canada taxes, the following items are usually necessary:

Canadian income records such as T4 slips, T5s, and self-employment statements
U.S. income forms, including W-2s, 1099s, or K-1s
Foreign account details for FBAR Canada and FATCA reporting
Proof of Canadian residency, like immigration documents or residency certificates
Information on Canadian investment and retirement plans (RRSPs, TFSAs, pensions), which may be treated distinctly in parallel to the US-Canada tax treaty
Documentation of foreign taxes paid, useful when applying credits or claiming the FEIE Canada

If you require professional assistance with U.S. tax preparation in Canada, contact Dimov Tax today. Our dedicated team is ready to present expert aid.