Canadian Citizen Moving Back to Canada from USA
Tiffany Woodfield, Senior Financial Advisor, Associate Portfolio Manager, CRPC®, CIM®, TEP®
Summary of Key Points
US advisors cannot advise non-residents, creating the risk of forced liquidation within 30–60 days and major taxable events.
Working with a dual-licensed cross-border advisor before moving helps prevent costly pitfalls. Dual-licensed advisors can manage portfolios and produce full Canadian and US tax receipts.
Taxable accounts may require tracking two cost bases and currencies, especially if one is still a US person and holds PFICs.
Retirement planning must coordinate US and Canadian pensions, time withdrawals, and avoid assuming IRA-to-RRSP rollovers are tax-neutral.l.
Video Script
In this video, I’ll go over what you need to know about tax planning and investment management if you’re a Canadian citizen moving back to Canada from the US.
My goal with this video is to give you a basic overview that will help you prevent expensive mistakes.
Hi, I’m Tiffany Woodfield, a cross-border advisor, associate portfolio manager, and co-founder of SWAN Wealth Management.
Over the past few years, I’ve spoken to hundreds of professionals and entrepreneurs with cross-border investments. And I’ve noticed that there tends to be a lot of confusion around how to deal with investments and registered retirement accounts after moving.
As a Canadian returning to Canada from the US, it’s important to know about 3 main things before you move:
Cross-Border Investment Management
Taxation of Capital Gains (Or taxation of non-registered accounts)
AND Cross-Border Retirement Planning
When you have a high net worth, each of these three elements is equally important.
So, let’s get into it!
Once you move to Canada, your US advisor can no longer manage your assets since they aren’t licensed in Canada. You’ll likely receive a letter from your investment firm stating you have 30-60 days to move your account, or they’ll liquidate your retirement account. If they do liquidate your account, this will cause a major taxable event.
To prevent this from happening, you can start working with a cross-border advisor before you move. Make sure that you find a team that is licensed in Canada and the US. If you work with a portfolio manager who is dual licensed, they can create an investment portfolio that is customized to your needs and optimized.
In addition, if you have a dual-licensed team, they can provide you with all the tax receipts your accountant will need to file your taxes properly in the USA and Canada.
The majority of Canadian banks and investment firms do not provide two complete sets of tax receipts that you need.
This may seem like a small thing, but it’s actually a big deal because your accountant will have to spend an enormous amount of time cross-checking and calculating your investment taxes for Canada and the US. This costs you more and cross-border accountants are difficult to find ….you don’t want to risk them saying they are too busy to do your return. (Yes, this does happen)
In addition, you need to make sure that you don’t accidentally invest in PFICs.
For example, if you invest in Canadian mutual funds or Canadian ETFs, you will face complex reporting and headaches because these are considered PFICs by the IRS.
You will likely face a higher tax bill if you don’t work with a cross-border accountant and cross-border financial advisor before and after your move. If you keep your investments that are in a non-registered taxable account when you move from the US to Canada, you will need to track two different cost bases. One for the US and one for when you became a Canadian tax resident.
So, for example, you purchased a stock for $100 in the US and it was worth $200 when you moved to Canada. Then you sold it for $300. Canada has a capital gain of $100 and the US will have a capital gain of $200. If you think this complicates things, remember this is just one stock and it doesn’t even address the fact that Canada and US have different methods and tax rates for capital gains.
Tracking your cost base is complicated and time-consuming. But it’s something your cross-border advisor will take care of for you. If you don’t track your cost base, you may face double taxation.
When it comes to retirement planning, you need to consider how to time your withdrawals so that you minimize tax. If you worked in Canada and the US for part of your career, you’ll likely have accumulated CPP and Social Security. There are strategies around which to take and when to take them.
In addition, registered retirement vehicles such as RRSPs, 401(k)s, and IRAs have different rules that you must be aware of. And it’s rarely tax-neutral to move an IRA or 401(k) into an RRSP.
You need to consider the timing of withdrawals and which one to take money from first so you avoid paying excess tax.
If you have substantial assets, you shouldn't be doing this alone.
Ideally, you should find a cross-border financial advisor who will help you with all aspects of cross-border wealth management.
When you work with an advisory team licensed in Canada and the US, your life will be simpler.
At SWAN, we can manage investments such as an IRA, Roth IRA, and RRSP, whether you live in Canada or the US. You can simply click and see all your accounts held at one place.
We create your financial plan, considering assets and pensions on both sides of the border. And we customize your investment portfolio based on your goals, risk tolerance, and residency.