Financial Planning and Tax Tips for a US Citizen Living in Canada
Tiffany Woodfield, Senior Financial Advisor, Associate Portfolio Manager, CRPC®, CIM®, TEP®
Summary of Key Points
The video covers top tax and financial planning tips for a US citizen living in Canada, focused on saving money.
Investing in Canadian mutual funds and ETFs, or using a TFSA or RESP account, can trigger strict and complex US tax filings.
A 401(k) or 403(b) can be rolled into an IRA and managed with a dual-licensed financial advisor.
Increased regulation means FBAR penalties can reach $10,000 or up to 50% of an account for non-compliance.*
The recommended next step for US persons living in Canada is to speak with a cross-border financial advisor and accountant.
A cross-border advisor can optimize investments and help you understand the cross-border tax implications of your move.
*These numbers may change as regulations change. Make sure you check government websites for the most up-to-date information.
Video Script
In this video we’re going to discuss the top things a US citizen living in Canada needs to know about taxes and financial planning. You’ll also learn how this can help you save money.
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As a cross-border financial advisor with a Chartered Retirement Planning Counsellor designation from the US, I often work with clients who are dual citizens or green card holders and need help understanding the complexities of their financial situation and the problems they’re having.
There are three things you need to know as a US citizen living in Canada:
1) Investments and Taxation
First …if you invest in Canadian mutual funds, ETFs, RESPs or in a TFSA you are subject to strict and complicated tax guidelines. These have negative tax implications.
If you invest in a Canadian Foreign Corporation, which is called a CFC, the Global Intangible Low-Taxed Income tax may apply to you. Some of the options to avoid GILTI tax are you could renounce your US citizenship, restructure the ownership of the corporation or use a GILTI exception. To do any of these you would need to consult with a lawyer who is familiar with the rules.
2)Your 401k in Canada
Next …If you have a 401k or 403b in the US you can roll it over to an IRA and have it managed from Canada if you work with a dual-licensed financial advisor. You can then get advice on your investments and have them tailored to your needs.
3) FBAR Penalties
Finally... Regulations and surveillance of US citizens living outside of the US have increased. The consequences of not being in compliance with the IRS are substantial. FBAR Penalties start at $10,000 USD and go up to 50% of the balance in the foreign account.
Have you considered the tax implications of your cross-border move?
The first thing you should do to take care of this is make sure you aren’t invested in anything that causes an extra tax liability such as Canadian Mutual Funds or ETFs.