Crossborder Personal Finance

The US-Canada Tax Treaty allows Canada to recognize Roth IRAs. If you follow a few simple steps, the CRA will treat your Roth IRA similarly to the US: capital gains, interest, and withdrawals will remain tax-free in Canada. When we moved to Canada, we found the election filing process a bit daunting, but it’s actually quite simple. This article explains the steps you need to take and the crucial things to avoid, so your Roth IRA maintains its tax-free status in Canada.

Before Moving

Before you move, you should probably shift your Roth IRA to a US brokerage that is willing to work with Canadian residents. Schwab and Fidelity are two that are typically willing to hold US retirement accounts for Canadian residents, whereas Vanguard is not, but these policies are fluid so it’s always worth confirming.

Another think you might want to consider doing is converting any traditional IRAs to Roth IRAs ahead of your move. If you intend to remain in Canada for retirement, it’s likely that your tax rate in retirement will be higher than it is while living in the US, particularly if you’re living in a state without income tax. If you’re going to do these conversions, it is essential that they be completed before your move date. As we’ll discuss later, doing it afterwards will contaminate the Roth IRA and render any future growth taxable.

Ideally, you’d spread these conversions out over the course of several years (to mitigate the US tax impact) and the math on whether or not it’s worthwhile will vary for each situation.

After Moving

After you move, there are a few key things to do (and not do) in order to preserve your Roth IRAs tax-free status in Canada.

1. File an Election with the CRA

The election is a letter that should accompany your first income tax filing to the CRA after becoming a Canadian resident. Per the CRA, this letter should contain the following information:

• your name, SIN and SSN
• the name and address of your Roth IRA trustee or administrator
• your Roth IRA account number
• the date that the Roth IRA was established
• the date that the individual became resident in Canada
• the balance of the Roth IRA on the date you became resident in Canada (or December 31, 2008, whichever is later)
• the amount and date of the first Canadian Contribution made to the Roth IRA, if any
• a signed statement indicating that you elect to defer taxation in Canada under paragraph 7 of Article XVIII of the Canada‑U.S. Treaty with respect to any income accrued in the Roth IRA for all tax years

As we’ll discuss below, the highlighted piece of information should, ideally, be N/A.

2. Make No Contributions after Moving to Canada

This is very important. Do not make ANY contributions to your Roth IRA after becoming resident of Canada. If you do, in the CRA’s eyes, you are effectively splitting your Roth IRA in two. The value of the Roth IRA before that contribution remains tax-free, but all contributions, as well as the income going forward on both the pre-Canadian contribution and post-Canadian contribution portions of the IRA will be taxable.

Needless to say, this is an undesirable outcome and could also prove to be a reporting headache as the split only exists in the CRA’s eyes and would not be reflected in your brokerage account.

3. Keep a Copy of the Election and All Other Records

You don’t need to re-file an election if you roll your Roth IRA over to another brokerage, but keep a clear paper trail that shows all rollovers, contributions (none), income and withdrawals so that you can maintain your tax-free status.

In Conclusion

The key lesson: file your election on time and make no contributions after moving to Canada. A little paperwork now saves significant headaches and potential taxes later. And if you haven’t followed these steps, seek the guidance of a crossborder CPA.

You can find the CRA’s official policy on Roth IRAs at this link.

One additional note — even though they are similar accounts, there is no mechanism for rolling a Roth IRA into a TFSA. You could theoretically do it, but because the TFSA is taxable from the US POV there’s no advantage.

It is hard to find a US brokerage that will hold a taxable account for a Canadian resident, so when moving from the US to Canada, you’ll likely want to bring your taxable account (called non-registered here in Canada) with you. The good news is that it’s easy to find a Canadian brokerage that will hold this for a US citizen, and provide you with the tax documents that you need to do both your Canadian and US taxes.

Step 1: Track the Adjusted Cost Base for your Holdings

This warrants its own post, but it’s important to track the adjusted cost base (ACB) of your non-registered investments from both the US and Canadian perspective. For the US side, the ACB is based on the price you paid when you bought the assets. On the Canadian side, though, the ACB is set to the value of your assets on the day you move to Canada, and then continues to adjust as additional sales or purchases are made.

Note that this is the day you move to Canada, not the day your account moves to Canada, thus you’ll almost certainly need to track it yourself, rather than relying on your Canadian brokerage.

A popular tool for tracking this is the aptly named adjustedcostbase.ca. If you use this, I strongly encourage you to backup your data whenever you make updates, just in case.

Step 2: Prepare your US Holdings for Transfer

If you hold individual stocks or ETFs already, you should be OK. It wouldn’t hurt to check with the Canadian brokerage you’re going to use (see step 3), but unless you’re holding something unusual it shouldn’t be an issue.

If you hold mutual funds, you’ll want to convert them to their ETF equivalents, if possible. The reason for this is that you likely won’t be able to hold US mutual funds in your Canadian brokerage account. So if you’re invested in something like VTSAX, you’ll want to contact Vanguard and ask them to convert it to the equivalent amount of the ETF version — VTI. This won’t be a taxable event.

If you hold mutual funds that don’t have ETF equivalents, your options are limited. You could check with your Canadian brokerage about holding the mutual fund, but the answer will likely be no. In that case, your best option may be to sell the fund and buy a similar ETF, but this will be a taxable event.

And just to be clear, even though US mutual funds are typically off-limits for Canadian residents, the same rules don’t generally apply to US ETFs. In fact, because they have lower fees, US ETFs are popular among savvy Canadian investors without any particular ties to the US.

Step 3: Open a Canadian Brokerage Account

I discuss this in more detail elsewhere but, in brief, my recommendation is usually Wealthsimple or Questrade. Both of these brokerages periodically offer a sign-up bonus (e.g. some % of cashback on the incoming assets) so it’s worth checking both when the time comes to transfer your account.

When you create your account, you’re going to set up a non-registered (meaning taxable) USD account. By keeping the account in USD, you’ll both have a place to transfer your US holdings into and make it easier to avoid inadvertently buying something (e.g. a Canadian ETF) with PFIC filing requirements. This does open the door to potential currency risk but, in my opinion, the advantages outweigh the risks in terms of transferring in a US taxable account.

You likely won’t be able to make your Canadian brokerage account until you have a Canadian address, but that’s OK. You shouldn’t have any trouble initiating the transfer after you move, so long as you do not preemptively update the address on your US brokerage to something Canadian. If you do this, the brokerage could potentially freeze the account or force a quick liquidation. Thus, rather than updating the address on your US account, my advice would be to simply set up a Canadian brokerage once you have an address, and then initiate the transfer from your US account. Once the transfer goes through, you can download your historical statements and close the US account.

Note: if you were looking to set up a non-registered brokerage account in Canada from scratch (meaning you weren’t transferring in US assets) I might recommend a different approach. For example, you could potentially set up a CAD account and invest in individual stocks to avoid PFIC requirements, depending on your goals and other asset allocation.

Step 4: Initiate an In-Kind Transfer

The exact process will depend on the brokerage, but the key is to do an in-kind transfer. That means your US brokerage will simply send the holdings to your Canadian brokerage, as opposed to selling them and sending the cash. If you do it as an in-kind transfer, it is not a taxable event. If you liquidate your US holdings and send the cash, it’s taxable.

Here are the steps for Questrade.

Here are the steps for Wealthsimple.

After you initiate the transfer, it takes a while (around 20 business days). Because it’s an in-kind transfer, though, you aren’t out of the market during this time.

Final Thoughts

That’s it! It’s quite easy (although a bit slow) to move a taxable account from the US to a non-registered account in Canada. And if you’re already invested in ETFs (or mutual funds with ETF equivalents), you should be able to do it in a way that doesn’t trigger any taxable events. If you have any questions, though, please don’t hesitate to post them in the comments.

Two other things I want to mention:

1) Exit Tax — Canada charges an exit tax when people who were Canadian tax residents move away. For your taxable account, this tax would be on the gains since you moved to Canada. In other words, Canada treats your taxable account as if you bought it the day you moved to Canada and sold it the day you moved away.

2) Estate Planning — This is definitely outside the scope of this post, but as you transfer your assets from the US to Canada, you’ll need some sort of Canadian estate plan to cover these assets. A quick and dirty option if you want to keep your US estate plan intact and add a separate will for your Canadian assets could be something like MyExpatWill from LegalWills. This undoubtedly wouldn’t work for all situations, but it may be a good solution for some.

I had a conversation recently where two important Roth IRA questions came up.

1. Is it possible to file a Roth IRA election with the CRA late?
2. What if I made a contribution to my Roth IRA after becoming a resident of Canada?

First of all, some context: the Canada-U.S. tax treaty recognizes Roth IRAs, which means that the CRA will treat them as non-taxable. The requirement for getting this treatment is filing an election with the CRA, which newcomers to Canada are asked to do on or before the tax filing due date for the tax year that you became a Canadian resident.

But what if, for some reason, you didn’t file this election? Is it possible to file it late?

The good news is that the answer to our first question is yes. I can’t find it on the CRA website, but in this email shared by Phil Hogan the CRA says:

We do accept late filed elections without any penalties...as long as no contributions were made while they are resident of Canada, they could file an election.

So if you’ve neglected to file your Roth IRA election with the CRA and you haven’t made any contributions while a resident of Canada, you should be in good shape. Talk to your CPA, but you should be able to file the election and be all set.

That highlighted portion is really important, though. If you have made contributions while resident of Canada, it’s a different story. You may not be able to file an election, and there isn’t a mechanism to undo the Canadian contribution, as per this CRA response shared by Video Tax News.

Subparagraph 3(b) of Article XVIII of the Treaty provides that the term "pensions" generally includes a Roth IRA, within the meaning of section 408A of the Code. However, if a Canadian Contribution is made to a Roth IRA, subparagraph 3(b) also provides that part of the Roth IRA will cease to be considered a "pension"...Neither the Act nor the Treaty provides any mechanism by which a Canadian Contribution, or the negative tax ramifications of a Canadian Contribution, can be reversed or rectified.

Again, I would absolutely encourage you to talk to an experienced crossborder CPA in this situation, but the response above doesn’t sound promising. Regardless, it definitely emphasizes the importance of not contributing to a Roth IRA after moving to Canada. From the CRA’s perspective, the minute a Canadian contribution hits a Roth IRA, the account is effectively split. The balance that existed up to that first Canadian contribution can be withdrawn tax-free, but the subsequent income, and all withdrawals beyond that balance, are taxable.

As per the CRA:

1.13 Effectively, a Canadian Contribution splits a Roth IRA into two parts – one part consisting of the balance in the Roth IRA immediately before the Canadian Contribution and the other part consisting of the Canadian contribution (and any subsequent contributions) and all income accrued in the Roth IRA after the Canadian Contribution. The first part continues to be considered a pension and remains exempt from taxation in Canada (if an Election had been filed). The second part ceases to be considered a pension and becomes subject to Canadian taxation.

In other words, it isn’t just the Canadian contribution and the income earned on that contribution that the CRA considers taxable, its all of the income earned in the Roth IRA from that part forward.

So the key takeaway here is do not contribute to your Roth IRA after becoming a Canadian resident. If you need to file the election with the CRA late, it shouldn’t be an issue, so long as you haven’t made a Canadian contribution. And if you do find yourself in this situation, it’s worth reaching out to a good crossborder CPA to confirm the particulars.

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

Updated Feb 2025.

As a US person 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 on, which is a non-taxable event.

Investing in Canadian dollars is trickier. The simplest 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.

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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 crossborder 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 crossborder 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. If you’d like to talk through your particular situation, please don’t hesitate to reach out.

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.

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 gray 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 crossborder tax expert before making any decisions.

Updated Feb 10, 2025

If you’re looking for suggestions on choosing a Canada-friendly US brokerage for your US accounts, please see this article.

As is often the case with crossborder financial issues, the Canadian side of things is more straightforward. Canadian brokerages are, as far as I have found happy to do business with US citizens living in Canada. For a taxable (aka non-registered) account, it would be great to find a brokerage that provides 1099s (for US tax returns) in addition to the T5s (for Canadian tax returns). For RRSPs, this isn’t an issue.

Crossborder-friendly Canadian Brokerages

Here are the providers that I’d encourage you to consider. The first two (Wealthsimple and Questrade) are the ones that I have the most experience with, but the second two (Qtrade and National Bank Direct Brokerage) also have some promising features. All four of them issue 1099s.

1. Wealthsimple – Their Self-Directed Investing account offers commission-free buying and selling over 14,000 stocks and ETFs.
2. Questrade – Their Cash and Margin accounts offer commission-free trades for Canadian and US stocks and ETFs. They don’t appear to offer a Joint Cash account (just a Joint Margin).
3. Qtrade – Their Cash and Margin accounts offer commission-free buying and selling of 100+ ETFs, ~50 of which are US-listed.
4. National Bank Direct Brokerage – Their Cash and Margin accounts offer commission-free buying and selling of all US and Canadian stocks, ETFs and options. There is a $100 annual administration fee, but it is waived with balances greater than $20,000.

As with picking a Canada-friendly US brokerage, the fees and policies above are subject to change so I encourage you to reach out to potential brokerages before deciding. Below is a list of questions that may be useful in evaluating their fit for your situation.

Crossborder Questions for Canadian Brokerages

1. Do you provide 1099s for non-registered (aka taxable) accounts?

Answer we’re looking for: Yes.

Getting a 1099 will make doing your US taxes easier. All four of the Canadian brokerages above did this when I last spoke with them.

2. Do you have commission-free trading for ETFs (and, if so, which ETFs)?

Answer we’re looking for: Yes.

As of this writing, Wealthsimple and National Bank Direct Brokerage offer commission-free buying and selling of lots of stocks and ETFs. Qtrade also offers commission-free buying and selling, but of a much narrower range of ETFs. Questrade only offers commission-free buying.

3. Do you offer USD non-registered accounts?

Answer we’re looking for: Yes.

This is essential if you’re looking to shift your taxable (aka non-registered) account from a US brokerage to a Canadian one, which I generally recommend. By keeping your non-registered investments in US-listed ETFs, you’ll thus avoid PFIC filing requirements. As of this writing, all four of these brokerages offer this.

4. What are the fees associated with your accounts?

Answer we’re looking for: As low as possible.

• Wealthsimple’s pricing
• Questrade’s fees and commissions
• Qtrade’s fees and commissions
• National Bank Direct Brokerage’s fees and commissions