Moving from Canada to the United States can be an exciting but overwhelming experience, especially when it comes to taxes. Here are some important things to keep in mind to avoid double taxation and ensure compliance with both countries’ tax laws.
How do I avoid double taxation?
- The US and Canada have a tax treaty that helps prevent double taxation. However, it’s still important to understand how taxes work in both countries to avoid paying taxes twice on the same income.
- You may be eligible to claim foreign tax credits on your US tax return for taxes paid to the Canadian government.
How do I report my RRSP, RRIF or TSFA accounts?
- As a Canadian resident, you are likely familiar with Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Fund (RRIF) and Tax-Free Savings Accounts (TFSAs). If you have these accounts, it’s important to report them to the IRS on your US tax return.
- As a US taxpayer, you generally have to report your RRSPs, RRIFs and TFSAs on your US tax returns using Form 8938 (Statement of Specified Foreign Financial Assets) and FBAR (Foreign Bank Account Report), if applicable.
- The growth within RRSPs and RRIFs is not subject to US tax until it is distributed. However, you may be subject to Canadian tax on the growth within the fund, depending on the specific circumstances of your investments and residency status.
- You do pay tax on the growth within TFSA even if it is non-distributed.
Should I withdraw my RRSP, RRIF or TSFA accounts?
- Withdrawing your RRSP, RRIF or TFSA accounts before moving to the US can have significant tax implications.
- It’s important to speak with a tax professional before making any decisions about withdrawing your accounts.
How do I inform the CRA that I am no longer a resident?
- If you are no longer a resident of Canada for tax purposes, you need to inform the Canada Revenue Agency (CRA) of your change in residency status. You can do this by completing and submitting Form NR73, Determination of Residency Status – Leaving Canada.
- It’s important to note that even if you are no longer a resident of Canada for tax purposes, you may still need to file a Canadian tax return if you have income from Canadian sources (such as rental income or investment income).
How do I determine if I’m being taxed as a tax resident or as a non-resident?
- Your tax residency status will depend on a number of factors:
- amount of time you spend in each country;
- income sources;
- your ties to Canada vs.USA;
- visa type.
- It’s important to determine your residency status to file taxes correctly in each country.
What are some tax deductions or credits I qualify for?
- As a new US resident, you may be eligible for tax deductions and credits that can reduce your tax liability. Examples include Foreign Tax Credit (Form 1116) and Foreign Earned Income Exclusion (Form 2555). To learn about the specifics and qualifications, please reach out to Dimov.
- Some common deductions and credits include the standard deduction, itemized deduction, capital loss deduction, passive loss deduction, IRA deduction, HSA contribution deduction, self-employed health insurance deduction, student loan interest deduction, child tax credit, and earned income tax credit.
Moving to the US can be an exciting adventure, but it’s important to understand your tax obligations in both countries. Tax specialists at Dimov Tax can help ensure you stay compliant with both countries’ tax laws and avoid any potential tax pitfalls.