US → Canada: Tax Guide for Americans Living in Canada

Becoming a Canadian Tax Resident

Canada uses a residency-by-ties test, not a day count. The CRA looks at significant residential ties (home, spouse, dependents) and secondary ties (driver's license, health card, bank accounts, club memberships) to decide whether you are a factual resident from the day you established those ties. The 183-day deemed residency rule exists, but most Americans become resident long before they hit it.

Once resident, Canada taxes your worldwide income from the date of arrival — there is no full-year fiction. Pre-arrival income stays out of the Canadian return, and a step-up in basis applies on most non-Canadian assets at the date of entry, which is one of the friendlier provisions in Canadian international tax.

• Significant residential ties (home, spouse, dependents) usually establish residency from day one.
• Step-up in basis on most non-Canadian capital property at the date you become resident — a planning gift you cannot recover later.
• Canadian tax year is the calendar year. T1 General is due April 30, June 15 if self-employed.

The US-Canada Treaty and the Saving Clause

The US-Canada Tax Convention covers everything from withholding rates to social security totalization. Like all US treaties, it contains a saving clause (Article XXIX(2)) that lets the US tax its citizens regardless. But unlike most treaties, the US-Canada version carves out specific protections that survive the saving clause — including the RRSP deferral election and the totalization of payroll taxes — making it materially more useful to Americans living in Canada.

Article XVIII handles pensions and explicitly recognizes RRSPs and RRIFs. Article XXIV provides foreign tax credit relief, and the IRS automatically treats RRSPs as deferred trusts under Rev. Proc. 2014-55 — no Form 8891 election required. WO-CS05 walks through the treaty articles that matter most.

RRSPs, TFSAs, and RESPs: The Three-Way Split

Canada has three flagship registered accounts and the US treats each one differently. RRSPs are the success story: Article XVIII plus Rev. Proc. 2014-55 give automatic US deferral of inside-the-plan growth. You report contributions and distributions, but you do not pay US tax on RRSP earnings annually. TFSAs and RESPs are the disaster: the US treats them as foreign grantor trusts, triggering Form 3520 and Form 3520-A annually with penalties starting at $10,000 for late filing.

The practical result is that most US-citizen residents of Canada use RRSPs aggressively, avoid TFSAs entirely, and either avoid RESPs or have a non-US-citizen spouse own them. WO-CS04 (RRSP for US Citizens) is the deep dive.

• RRSP — automatic US deferral, no Form 8891, fully treaty-protected.
• TFSA — fully taxable to IRS, often a foreign grantor trust, Form 3520/3520-A required.
• RESP — same trust treatment as TFSA; non-US-citizen spouse should own it where possible.

FBAR, FATCA, and the Cross-Border Reporting Stack

All the standard US international reporting still applies. Canadian bank accounts, brokerage accounts, RRSPs, TFSAs, RESPs, and life insurance with cash value count toward the $10,000 FBAR aggregate. FATCA Form 8938 thresholds ($200,000 year-end / $300,000 peak for single filers abroad) catch most US-citizen residents. PFIC rules apply to Canadian mutual funds and most Canadian ETFs, so individual stocks and US-domiciled ETFs in an RRSP are the standard workaround.

Canada also enforces its own reporting on US residents holding Canadian assets — Form T1135 for foreign property over CAD 100,000, plus departure tax reporting if you ever leave. WO-US02 (FBAR), WO-US03 (FATCA), and WO-CS17 (Canada Departure Tax) connect the dots.

Social Security, CPP, and Totalization

The US-Canada Totalization Agreement prevents you from paying both US Social Security/Medicare (FICA) and Canadian CPP/EI on the same wages. Employees of a US company seconded to Canada for under 5 years can stay on US FICA with a Certificate of Coverage from the SSA. Long-term hires and locally-employed Americans pay into CPP instead, and totalization lets you combine US and Canadian credits when claiming benefits at retirement.

Self-employed Americans in Canada owe Canadian CPP, not US self-employment tax — the totalization agreement assigns coverage to the country of residence. This is one of the few situations where being self-employed abroad is actually cleaner than being self-employed in the US.

FEIE vs FTC in Canada: Almost Always FTC

Canadian combined federal and provincial marginal rates run from 20% in the lowest bracket to over 53% at the top in Ontario, Quebec, and Nova Scotia. Foreign tax credits generated against Canadian income generally exceed your US tax on the same dollars, so the FTC zeros out your US bill and builds carryover. FEIE caps at $130,000 (2025), discards the excess Canadian tax, and disqualifies you from the refundable Child Tax Credit and IRA contributions. WO-US01 covers the mechanics and WO-CS05 covers the treaty interactions.

• FTC is the default for almost every American in Canada.
• FEIE only competes for very low Canadian-tax situations — usually a partial first year.
• Quebec's separate provincial return adds complexity but credits still flow to Form 1116.

Year-One Action Plan

Most Americans crossing into Canada underestimate the importance of the date of entry — it is the single most consequential planning moment in the corridor because it sets the basis step-up on your non-Canadian capital assets. Get the file dates right and you save real money.

• Document the exact date you established Canadian residential ties; it controls basis step-up.
• Open RRSP space at your earliest Canadian employment; avoid TFSAs as a US citizen.
• Get a Canadian SIN and register with the CRA.
• Decide whether to move retirement assets — usually no, leave 401(k)s and IRAs in place under Article XVIII.
• File T1135 if you have non-Canadian assets above CAD 100,000.
• Read WO-US01, WO-US02, WO-US03, then WO-CS04 and WO-CS05.