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Hi there, as someone who’s planning to relocating to the US end of the year, how should I tax plan for my investment accounts? Since I would be living in the US with no primary ties to Canada, would it be more optimal to opt to be treated as a US tax resident and a Canadian non-tax resident? Thanks!
Hi Vik,
Generally speaking, if your primary source of income is from the US, it’s better to be classified as a tax resident of the US and a non-resident of Canada. This is because the US has lower tax rates on most sources of income than Canada. If you have no primary ties to Canada and have relocated to the US to live and work there and have no intention to return to Canada, then you are a tax resident of the US and a non-resident of Canada.
Before moving to the US, sell the investments in your TFSA/FHSA that have increased in value, because these accounts are taxable in the US. You can keep your RRSP; both Canada and the US treat an RRSP as a tax-sheltered pension plan, where income and gains realized in the RRSP are not taxable. However, withdrawals from an RRSP are taxable in the US and Canada; foreign tax credits can be claimed to avoid double taxation.
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