Dual Tax Residency & Tie‑Breaker Rules:

A Canadian moving to the U.S. may be deemed a tax resident of both countries, creating potential for double taxation and conflicting rules. The Canada–U.S. Tax Treaty, through Article IV (tie‑breaker rules), establishes primary tax residency and clarifies each country’s taxing rights to avoid complications.

Canadian Investment Holdings:

Canadian‑domiciled mutual funds and ETFs are often classified by the IRS as passive foreign investment companies (PFICs), when held in taxable (non-registered) investment accounts, triggering punitive tax treatment and burdensome reporting requirements, including IRS Form 8621. To avoid these complications, investors should consider shifting to U.S.-compliant options such as Canadian individual securities (stocks) or U.S.-listed ETFs.  Further, holding these taxable accounts through a multi-currency investment platform at a  U.S.-domiciled custodian reduces Foreign Bank and Financial Accounts (FBAR – FinCEN Report 114) reporting requirements and allows the account holder to receive proper 1099 U.S. tax forms.  

RRSPs, TFSAs, RESPs, and Other Registered Plans:

The U.S.-Canada tax treaty allows RRSPs to receive U.S. tax deferral on the growth until withdrawal. However, not all U.S. states follow the treaty and can elect to tax the income annually.  TFSAs lack IRS recognition, resulting in no deferral and annual U.S. tax. RESPs are also taxable in the U.S., with interest, dividends, and capital gains taxed annually. Regular review and potential consolidation or restructuring of these accounts is essential.

Canadian Real Estate Ownership:

U.S. residents owning Canadian property face Canadian capital gains tax upon sale, plus U.S. capital gains tax—offset by foreign tax credits. Renouncing Canadian residency may trigger a departure tax. Proper planning is needed to manage Canada’s principal residence exemption if you sell your Canadian residence prior or after your departure from Canada.  You will need to be aware of the filing of CRA Form T2062 and the onerous Canadian withholding tax and administrative burdens that you will face selling Canadian real property after exiting Canada. 

Pension and Retirement Income:

Income from CPP, OAS, and Canadian pensions is taxable under the Canada–U.S. Tax Treaty. Effective planning is required to navigate withholding tax rules, use foreign tax credits, and manage currency‑exchange risks that affect the value and tax treatment of these cross‑border retirement income sources.

Reduce Taxes and Preserve Savings:

Minimize double taxation by leveraging foreign tax credits, treaty‑based elections, and tax‑efficient investments. Preserve RRSP and RRIF tax deferral (beyond your – if eligible – RRIF required distributions) and structure cross‑border withdrawals to reduce effective tax rates over time. A coordinated strategy ensures both tax efficiency and long‑term retirement security.

Simplify Compliance and Estate Planning:

Streamline compliance by consolidating financial accounts and working with advisors who understand cross‑border tax, estate and investment rules. Prepare dual‑country wills and plan for estate‑tax exposure and potential dual probate. Coordinated planning helps ensure smooth asset transitions and reduces legal and tax complications for heirs who live in the U.S. or remain in Canada. If an inheritance is received from Canada, as a U.S. resident, it is important to understand the planning and tax compliance requirements you might face as a beneficiary of a Canadian estate. Further, if the assets are inherited in Canadian dollars, and the beneficiary does not wish to convert them to U.S. dollars because of the exchange rate, it is important to partner with a dually licensed Canada-U.S. cross-border advisor that can oversee the Canadian assets in the U.S.

Coordinate Benefits and Coverage:

Protect access to health care by coordinating U.S. Medicare and Canadian provincial coverage. Maximize retirement benefits by understanding how CPP, OAS, and U.S. Social Security interact, ensuring eligibility and avoiding benefit reductions caused by overlap.

Income Tax Planning:

Understand how your residency status for tax purposes will change and how that impacts your worldwide income. Canada and the U.S. have different definitions of tax residency, and failing to plan the timing of your move or your income can lead to costly double taxation.

Investment Planning:

Many Canadian investment accounts  can create unfavorable tax treatment under U.S. tax law, particularly due to PFIC (Passive Foreign Investment Company) rules. Strategic restructuring of your investments before the move can help mitigate unnecessary tax burdens.

Real Estate and Property Considerations:

Selling or keeping your Canadian home? You’ll need to plan around potential departure tax (capital gains on deemed disposition) in Canada and U.S. basis adjustments. If you plan to rent out your Canadian property, you’ll have to comply with Section 216 tax rules and U.S. foreign rental income reporting.  If you ultimately sell any Canadian real property, you will be required to file CRA Form T2062 which will trigger nonresident withholding tax obligations which can be an onerous administrative burden.

Estate and Gift Planning:

The U.S. and Canada have different estate and gift tax regimes. Canadians moving to the U.S. may become subject to the U.S. estate and gift tax system, which includes lifetime exemption thresholds, annual exclusion limits, and potential planning opportunities using trusts or gifting strategies. Having beneficiaries who remain in Canada along with specific types of Canadian assets will need to be addressed within an updated estate plan.

Retirement Planning:

Cross-border treatment of retirement accounts like RRSPs, RRIFs, and pensions is complex. Proper elections and treaty-based planning can help avoid double taxation and ensure continued tax-deferred growth where available. Consider how future withdrawals will be taxed by both countries. When living a U.S. dollar lifestyle while receiving Canadian-source retirement distributions, it is important to understand and review your longer-term retirement projections given the fluctuating currency between both countries.

Filing and Reporting Obligations:

After relocating, you’ll be subject to a new and more complex reporting environment. This includes FBAR (FinCEN 114 and IRS Form 8938), FATCA, and other U.S. foreign asset disclosure rules. Failure to comply can result in steep penalties—even if no tax is owed.