Navigating Double Taxation: US and Canadian Rules

Taxes for Americans moving to Canada: Strategic Planning and Wealth Creation September 12, 2021 Living in Canada and considering a migration to the United States raises several important tax questions including steps you can take to become non-resident for Canadian income tax considerations. Cross-border taxes are a complex issue for Canadians who leave their country. Some items on this page should make you give some cautious consideration before moving. Regarding their personal situation, individuals should consult a cross-border tax professional; this article shouldn't be construed as tax advice. Residency Decision Most of the time, someone leaving Canada permanently would want to be considered non-resident of Canada. From a Canadian income tax perspective, a person's residency will depend on their individual facts and circumstances. Generally speaking, you are an emigrant for income tax reasons if you leave Canada to live somewhere else and break off your residence ties to Canada. Cutting off personal ties could mean selling a house in Canada and then settling permanently elsewhere;

Having dependants leave Canada or your spouse/common-law partner leaves Canada

disposing of personal belongings and cutting social ties in Canada, then acquiring or building them overseas. The severing—or lack of severing—of additional linkages, such these could potentially affect your resident status: a license for Canadian drivers; credit cards or bank accounts in Canada; and health insurance covering a province or territory of Canada. Considered as non-registered asset disposition From a Canadian income tax perspective, you seem to have sold many of your non-registered assets when you move out of Canada. This is characterized as a "deemed disposition," hence this event will set off any gains and losses related with the disposition of these assets. Should this tendency generate net profits, you may be liable for paying Canadian income tax on those gains. Should the "deemed disposition result in a net gain," the U.S. tax regulations will enable you opt to view those same assets as having been disposed of and reacquired concurrently for U.S. income tax purposes. This means, should you be a U.S. resident selling those assets, the capital gain subject to Canadian income tax upon your departure from Canada will not be subject to U.S. income tax as you were deemed to have sold those assets.

Though for Canadian income tax purposes they are not subject to a "deemed disposition,"

Among other exceptions, assets such your principal house and other real estate located in Canada, or registered plans like your RRSP, RESP and TFSA, will not have the same tax effects. Many Americans see keeping their RRSP, RESP, and TFSA as vital. Though money generated in the TFSA will be taxed for U.S. income tax concerns, as a resident of the United States you should be aware of this. For U.S. income tax issues, income received in a RESP could also be taxable. Conversely, money received in an RRSP often deferred for U.S. federal income tax purposes but may be taxed depending on the state in which you live. Especially considered are Finally, as a U.S. citizen, you should be aware of several tax concerns including U.S. gift tax, which may apply should you donate assets, and U.S. estate tax, which could be required following your death. Look for a cross-border taxation planner. As you can see, this piece addresses only a small number of the various tax concerns confronting Americans hoping to move to the United States; so, this decision is not without difficulties. See a cross-border tax consultant before deciding to move to the United States.

See your BMO financial specialist for further details.

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