US Taxes for Americans Living in Canada
The US-Canada border is the world's longest, and cross-border tax filing is among the most common expat tax situations. Americans in Canada owe taxes to both the IRS and the CRA (Canada Revenue Agency), but the comprehensive US-Canada tax treaty and Foreign Tax Credit prevent most double taxation. The complexity lies in Canadian-specific accounts (RRSP, TFSA, RESP) and how they're treated under US law.
Local tax authority
The US-Canada tax treaty (1980, updated multiple times including 2007 Fifth Protocol) is one of the most comprehensive bilateral tax treaties. It covers income tax, capital gains, pensions, and social security. Notably, it includes provisions for RRSP treatment, cross-border employment, and pension/social security portability.
Canada-specific complexities
- Canadian TFSAs are not recognized as tax-advantaged under US law, growth is taxable annually to US persons
- Canadian RRSPs require an annual election (Form 8891 abolished in 2014, now under treaty Article XVIII) for tax deferral to apply
- US-Canada totalization agreement coordinates Social Security / CPP contributions
- FBAR applies to all Canadian bank accounts, RRSPs, TFSAs, and RESPs above the $10,000 threshold
- Canadian provincial tax varies significantly (Quebec has its own separate tax return)
What's different about filing from Canada
TFSA and RESP: taxable to US persons
Canada's Tax-Free Savings Account (TFSA) is completely tax-free in Canada but is NOT recognized as tax-advantaged under US law. Interest, dividends, and capital gains inside a TFSA are fully taxable to US persons each year, the Canadian tax exemption doesn't translate. Similarly, RESP investment income is taxable annually to US persons unless a treaty election is in place. Many Americans in Canada have been unknowingly accumulating unreported taxable income in their TFSAs.
RRSP treatment for US persons
The Registered Retirement Savings Plan (RRSP) is treated more favorably: the US-Canada treaty allows US persons to defer RRSP income until distribution, similar to how an IRA is treated in Canada. Since the abolition of Form 8891, this deferral is elected on your return (typically via a Form 8833 treaty position). Failing to make this election means RRSP contributions and growth are taxed annually by the US, which eliminates the RRSP's benefit.
Cross-border commuting and employment
Many Americans work for US companies while living in Canada, or vice versa. The US-Canada treaty has specific provisions for cross-border employment income, including when each country can tax employment income and how withholding is coordinated. The US-Canada totalization agreement ensures you pay into only one country's social security system (either CPP/EI or US Social Security/Medicare, not both).
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Frequently asked questions about US taxes in Canada
Are my Canadian bank accounts subject to FBAR?
Yes. All Canadian financial accounts, TD Bank, RBC, RRSP, TFSA, RESP, brokerage accounts, count toward the FBAR threshold. If the combined maximum value exceeded $10,000 at any point, FBAR is required. Our Expat package includes FBAR filing.
Do I owe US tax on my TFSA earnings?
Yes. The Canada-US treaty does not protect TFSAs from US taxation. All income and gains inside your TFSA are taxable to US persons each year. Many Americans in Canada have years of unreported TFSA income, this can be corrected using the Streamlined Procedure.
Do I need to file both a US and Canadian tax return?
If you're resident in Canada, yes, you'll file a Canadian return with the CRA and a US return with the IRS. The treaty and Foreign Tax Credit prevent double taxation on most income types. We handle your US return; a Canadian accountant handles the CRA side.
I work for a US company while living in Canada, how is that taxed?
Typically, Canada gets first taxing rights on employment income earned while resident there. The US then applies the FTC to eliminate most or all remaining US tax. The US-Canada totalization agreement determines which country's social security applies.