Article content

U.S. citizens living in Canada not only have to file Canadian tax returns reporting their worldwide income, but they also have to file U.S. tax returns reporting the same income. That’s because the U.S. imposes taxes and filing requirements based on citizenship, not residency.

To make matters worse, if the U.S. citizen holds a TFSA, RESP or RDSP, these accounts are not recognized as tax-preferred by the U.S. and the income from these must be reported annually on a U.S. return. Most U.S. tax professionals consider these Canadian plans to be foreign grantor trusts from a U.S. tax perspective and thus also subject to onerous and costly information return filings. Many Canadian tax advisers recommend their clients to simply avoid these accounts altogether.

We apologize, but this video has failed to load.

tap here to see other videos from our team. Try refreshing your browser, or Relief may be on the way for people who pay tax on both sides of the border Back to video

Of course, the opposite is also true in that the U.S. has a variety of tax-deferred plans that are simply not recognized as tax-preferred in Canada. The Qualified Tuition Programs (529 Plans) are the U.S. equivalent of our RESPs, the Achieving a Better Life Experience accounts (ABLE Program) are similar to our RDSPs while the Roth IRA works similarly to our TFSA.