Common

Moving to Canada from the US

Moving from the US to Canada triggers a new set of tax residency rules, filing obligations, and planning opportunities. Canada taxes you as a resident from your arrival date, while the US continues to tax citizens on worldwide income indefinitely. Non-citizen US residents may have a departure year with dual-status considerations. Proper planning around the move date can significantly reduce the overall tax burden.

Key Points

  • Canada treats you as a tax resident from the date you establish significant residential ties (home, spouse/dependents in Canada).
  • US citizens remain subject to US tax on worldwide income even after moving to Canada.
  • US green card holders must continue filing US returns until the green card is formally abandoned (Form I-407).
  • Non-citizen, non-green-card holders may file a dual-status US return for the departure year.
  • Canada's arrival-year return includes worldwide income from the date of arrival through December 31.
  • Registered accounts (RRSP contributions, TFSA) become available once you are a Canadian resident with earned income.
  • The US exit tax under IRC 877A applies to covered expatriates who renounce citizenship or abandon green cards.

Action Items

  1. 1.Establish your Canadian residency date by documenting when you set up a home and moved significant ties to Canada.
  2. 2.File a Canadian arrival-year return reporting worldwide income from your arrival date.
  3. 3.If you are a US citizen, continue filing annual US returns and FBARs from Canada.
  4. 4.If abandoning a green card, file Form I-407 and evaluate whether you are a covered expatriate subject to exit tax.
  5. 5.Step up the cost basis of your investment assets to FMV on your Canadian arrival date for Canadian tax purposes.
  6. 6.Register for provincial health insurance and update all financial institutions on your new residency.
  7. 7.Plan RRSP contributions to coordinate with the US foreign tax credit for maximum benefit.

Frequently Asked Questions

Do I still file US taxes after moving to Canada?

US citizens must file US returns indefinitely. Green card holders must file until the card is formally abandoned. Non-citizen, non-green-card holders generally stop filing after the departure year, though FBAR obligations may continue if US accounts remain.

Can I contribute to an RRSP right away?

You need Canadian earned income to generate RRSP contribution room. In your first year, you can contribute based on any Canadian earned income from your arrival date. Full contribution room builds over subsequent years.

What is the US exit tax?

Under IRC 877A, covered expatriates (those who renounce citizenship or abandon a green card after 8+ years) face a mark-to-market deemed sale of worldwide assets. A gain exclusion threshold applies (adjusted annually for inflation), but large portfolios may owe significant tax.

Related Scenarios

Critical

TFSA US Tax Trap

The Tax-Free Savings Account is tax-exempt in Canada but receives no treaty protection in the US. The IRS classifies a TFSA as a foreign grantor trust, requiring Forms 3520 and 3520-A annually. Failure to file can result in penalties starting at $10,000 per form per year.

Critical

FBAR Filing Requirements

The Report of Foreign Bank and Financial Accounts (FBAR) must be filed by any US person with foreign financial accounts exceeding $10,000 in aggregate at any point during the year. The FBAR is filed electronically with FinCEN, not the IRS, and has its own deadline and penalty regime.

Core

Substantial Presence Test

The Substantial Presence Test (SPT) uses a weighted formula across three years to determine if a foreign national is a US tax resident. If you meet the test, you are taxed on worldwide income. Understanding the SPT is essential for snowbirds and anyone splitting time between Canada and the US.

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