If you’re looking for cross-border implications for US investment account types, please see this article.

As a US person¹meaning someone with US tax reporting requirements like a US citizen or Green Card holder living (and investing) in Canada, there are ramifications to the various investment account types that you’ll want to consider. Here’s a quick overview of the key considerations for the most common Canadian investment account types.

Non-Registered / Taxable Account

Generally speaking, I’d recommend that US citizens hold their taxable account in Canada with a Canadian brokerage. For some tips on choosing an appropriate brokerage, please see this page.

The big thing you’ll want to avoid in your non-registered account is investing in things that are classified by the IRS as Passive Foreign Investment Companies (PFICs). These are punitively taxed by the IRS and have onerous filing requirements. Thus, I avoid them. The easiest way to avoid them is by investing in US-domiciled ETFs, which is straightforward to do with a US dollar account at a Canadian brokerage. For existing US-domiciled ETF investments, you could transfer them from US brokerages to a Canadian one, which is a non-taxable event.

Investing in Canadian dollars is trickier. One way to invest in Canadian dollars while avoiding PFICs would be to invest in individual Canadian companies. Generally speaking, I’m not someone who favors dividend investing, but in this situation targeting a set of Canadian dividend aristocrats could make sense as a way to get some Canadian dollar income and favorable taxation. At the same time, this approach won’t work for every desired asset allocation. There isn’t one right way to do this, as it ultimately depends on your risk tolerance, both in terms of currency fluctuations and asset allocation.

Registered Retirement Savings Plans (RRSPs)

Registered Retirement Savings Plans (RRSPs) are pre-tax, tax-deferred retirement accounts where you withdrawals are taxed as income. Generally speaking, the amount you can contribute each year (aka your “RRSP room”) is 18% of your taxable income from the previous year. Thus, your first year in Canada, you won’t have any RRSP room and can’t contribute to it.

Here are a couple of key points about RRSPs that may not be obvious to folks coming from the US:

1. If your RRSP has an employer match, the employer’s portion also counts against your room. So if you had a 6% employer match, you could contribute 12%, and the employer contribution of 6% would bring you to the 18% match.
2. You can use RRSP room to fund a spousal RRSP. This is useful if one person earns more than the other — the higher earner can both lower their taxes now and help balance income in the future.
3. The RRSP calendar goes from March 1 to February 28. In other words, if you contribute in January or February 2021, it counts towards your 2020 room.

I encourage US citizens to take advantage of RRSPs as they are recognized as retirement accounts by the IRS. To avoid double taxation, you need to do an election on form 8891 to defer the US income tax on the RRSP investment until withdrawal.

Another nice thing about RRSPs for US citizens it that, because the IRS recognizes them as retirement accounts, you don’t need to avoid PFICs inside of an RRSP.

If you find yourself in an employer-provided group RRSP, you may find that the offerings aren’t amazing (in terms of fees). In this case, you may want to fund it up to any employer match, but then use your remaining RRSP room elsewhere, for example in a spousal RRSP at a brokerage of your choosing where you can pick any ETF you want.

Unlike an IRA, there isn’t a minimum age for RRSP withdrawals. RRSPs mature the last day of the calendar year that you turn 71. At that time, you can 1) take a lump sum withdrawal 2) roll it into an RRIF, from which you would make annual minimum withdrawals or 3) purchase an annuity.

One wrinkle with RRSPs is that, while the growth is tax-deferred from a US perspective, the contributions are generally not tax deductible on your US return. While Group RRSP contributions can often be deducted, personal RRSP contributions cannot. This typically isn’t an issue—as long as you have enough Foreign Tax Credits from your Canadian taxes to offset your US liability—but it is worth doing the math if you are planning a particularly large contribution to ensure you don’t drop your Canadian tax bill below what you owe the IRS.

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The next few account types have complicated compliance issues for US citizens. Generally speaking, my recommendation would be to avoid them.

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TFSA

To TFSA or not to TFSA, that is the question.

First, the good: A TFSA is a retirement account where you invest post-tax dollars and withdrawals are tax free. In other words, it’s similar to a Roth IRA, with one difference being that there is no minimum age for making a withdrawal. Another difference between a TFSA and a Roth IRA is that the room you receive each year ($7000 in 2025) is cumulative. In other words, if you don’t use it, it carries over. For Canadians, TFSAs are a great option for folks who are earning at a level where it makes sense to pay their taxes now, rather than deferring them to retirement.

For US citizens, unfortunately, things are more complicated. The IRS doesn’t recognize TFSAs, which means they will tax any accrued earnings as they would in a taxable account. This may be further complicated by the fact that your brokerage generally won’t provide income reports for a TFSA, since this isn’t taxed in Canada. This is definitely something you would want to confirm with your brokerage before opening your TFSA.

In addition, you would have to include your TFSA on your foreign reporting documents (e.g. FinCEN 114 and IRS Form 8938).

Finally, there is also a question as to whether or not the IRS considers a TFSA a trust. Some cross-border tax experts view it as a trust and thus recommend filing forms 3520 and 3520-A, adding complexity (and cost) to tax returns. Personally, I lean towards NOT considering a TFSA a trust (and thus wouldn’t file forms 3520 or 3520-A). Here’s a good summary of the argument from a cross-border tax attorney who has argued this successfully multiple times.

None of these complications are dealbreakers, but they will add cost and complexity to your US tax filings. At the same time, once you’ve accumulated a decent amount of room (say ~$25,000 CAD), it could make sense to fund a simple TFSA in a couple of USD ETFs (to avoid PFICs) with a brokerage that provides US tax slips.

Registered Education Savings Plan (RESP)

A Registered Education Savings Plan (RESP) is an account aimed at saving for a child’s education, similar to a 529 in the US. Unfortunately for US citizens, like a TFSA, it is not recognized as tax-free by the IRS, and thus brings complexity both in terms of taxes and accounting. The good news is that the IRS has clarified that RESPs are not trusts and thus do not require forms 3520 or 3520-A. Again, if simplicity is your goal, my general advice would be to avoid RESPs as US citizens, but there may be specific situations where they provide benefit.

Similar to a 529, it might be possible to have a trusted Canadian friend or family member open an RESP on your child’s behalf, but this is an area where I’d recommend getting expert guidance from a cross-border CPA. My main concern would be that either the CRA or the IRS (or both) could view this as an informal trust or agency relationship, attributing ownership of the plan back to you (and thus defeating the purpose of having someone else set it up). There could also be risks associated with the Canadian subscriber legally controlling the funds, exposing them to potential creditor or estate issues.

First Home Savings Account (FHSA)

A First Home Savings Account (FHSA) is a relatively new tax-free account that lets people contribute up to $40K for your first home. Unfortunately for US citizens, it is also not recognized by the IRS and comes with the same compliance complexities of the TFSA. So, similar to those, I would generally recommend not investing in this type of account. One potential use case if you’re eligible for the FHSA is to get some bonus RRSP room. You could fund your FHSA and immediately transfer this money to an RRSP, where you could invest it as per usual.

One note in closing — as you can see, there are grey areas around some of these account types (e.g. a TFSA for US persons), and these policies are always changing. Thus, it is important to get the guidance of a cross-border tax expert before making any decisions.

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  meaning someone with US tax reporting requirements like a US citizen or Green Card holder