Crossborder Personal Finance

Simple advice for complex situations

  • How to Move a Taxable Account from the US to Canada

    How to Move a Taxable Account from the US to Canada

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    by

    Dave
    in , , ,

    In my experience, it is hard to find a US brokerage that will hold a taxable (called “non-registered” here in Canada) account for a Canadian resident. So when you move, you’ll likely by moving your US taxable investments to 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.

    This article will just cover how to move US taxable investments to Canada. Moving retirement accounts (e.g. an IRA to an RRSP) is significantly more complicated and needs to be done very carefully. I’ll cover that in a future post.

    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

    This is where we actually move our US taxable investments to Canada. The exact process will depend on the brokerage, but the key is to do an in-kind transfer. That means your US brokerage will transfer 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! Moving taxable investments from the US to Canada is quite easy (although a bit slow). 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.

  • Deciding How to Invest in a Group RRSP with High Fees

    Deciding How to Invest in a Group RRSP with High Fees

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    by

    Dave
    in ,

    I’m a big believer in the efficacy of investing in low-cost index funds. At the same time, I’ve also found myself facing high-fee group RRSP options. What is the best way to approach limited options in a group RRSP plan? Let’s explore some of the different ways you might approach investing in a group RRSP plan that has high fee fund offerings.

    What are high fees?

    First of all, what do I mean by high-fee group RRSP options? I may admittedly be a bit extreme here, but I start to balk at anything over .3% or so. In my opinion, as an index fund investor, there just isn’t a good reason to pay fees higher than that.

    As an example, this is the US equity index offered in a group RRSP plan. It’s a re-branded version of a Blackrock ETF.

    The MER is .905%, which isn’t terrible (by Canadian standards) but isn’t great. A similar fund directly from BlackRock directly (or from Vanguard) has a .03% expense ratio, meaning the fees through our group RRSP provider are effectively 30x higher!

    What are our options?

    So what would I do in this situation? The key question is whether or not there is an employer match.

    1. If there ISN’T an employer match, I would just ignore my group RRSP and (assuming it made sense for my tax situation) I’d open a personal (or spousal) RRSP at a brokerage that I like and invest in low-cost index funds there. And because it’s an RRSP, you don’t need to worry about PFICs if you’re a US citizen.
    2. If there IS an employer match, then I’d recommend contributing to the group RRSP up to that match. In other words, if the match is 6%, contribute 6%. Then, with your remaining RRSP room, open a personal RRSP (or a spousal one). Even with the higher fees, the free money of the employer match is too good to pass up.
    3. Once you no longer work at that employer, if you have a group RRSP with high fees, you can transfer the funds to a personal RRSP and invest everything in lower-cost alternatives. This would not be a taxable event.

    Those are just a couple of things to think about when you see high-fee offerings in your group RRSP. If you have other suggestions or questions, please share them in the comments below!

  • Late Roth IRA Elections and Canadian Contributions

    Late Roth IRA Elections and Canadian Contributions

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    by

    Dave
    in

    The good news for people moving from the US to Canada is that the Canada-U.S. tax treaty allows for Roth IRAs to be tax-free on both sides of the border. There is a process to be followed, though. Specifically, you are asked to file an election with the CRA on or before the tax filing due date for the year you became a Canadian tax resident. In addition, you must not make a contribution to your Roth IRA after moving to Canada. What if you find yourself needing to file a late Roth IRA election, or having made a Canadian contribution? Let’s dig into these two questions:

    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?

    Can I File a Roth IRA Election Late?

    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.

    What If I Made a Canadian Contribution to my Roth IRA?

    That highlighted portion above 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 cross-border 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 cross-border CPA to confirm the particulars.

  • Questrade Now Offers Free Trades

    Questrade Now Offers Free Trades

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    by

    Dave
    in ,

    I’ve been a fan of Questrade since moving to Canada, as they are one of the Canadian brokerages that is most US-person friendly. At the same time, I’ve had to give the edge to Wealthsimple, as they offered free trades on stocks and ETFs, whereas Questrade just offered free buys. It doesn’t make a difference in the accumulation phase, but Wealthsimple was the clear winner for decumulation. Thus, this is a welcome change, if not an entirely surprising one.

    For more information on the details of Questrade‘s new fee structure, see this FAQ.

  • Fee-Free International ATMs for EQ Bank and Wealthsimple

    Fee-Free International ATMs for EQ Bank and Wealthsimple

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    by

    Dave
    in ,

    The Measure of a Plan has put together a page listing ATMs around the world (currently 67 bank companies in 40 countries) where Wealthsimple and EQ Bank customers can withdraw foreign currency without paying either foreign exchange fees or ATM transaction fees. Wealthsimple and EQ Bank are both good resources for crossborder folks (as they are USD and US tax form friendly), and this is a great additional feature to their accounts.

  • Cross-border Implications for Canadian Investment Accounts

    Cross-border Implications for Canadian Investment Accounts

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    by

    Dave
    in

    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.

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

    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.

    • 1
      meaning someone with US tax reporting requirements like a US citizen or Green Card holder
  • Choosing a Canadian Brokerage as a US Citizen

    Choosing a Canadian Brokerage as a US Citizen

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    by

    Dave
    in

    February 2026 Update:

    After years of using it, I’m not currently recommending Questrade. There are two main reasons:

    1. Customer Service at Questrade is, frankly, terrible. It takes hours to get connected to a human via chat, and weeks to get a response to an email. There is a higher level of service available for certain account values (Questrade Reserve) BUT this also requires highly active trading (250+ per year). Other services (like Wealthsimple) give you higher levels of service just based on account value, without the active trading requirement.
    2. Questrade’s non-registered accounts are margin-enabled by default. Like the active trading requirement, I think this encourages bad investing behavior.

    This is just my opinion, and I’m leaving the information below to help folks make the right decision for their own situation.

    —

    Finding a Canadian brokerage for US citizens is typically easier than finding a US brokerage that is willing to work with Canadian residents. 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, we want to find a Canadian brokerage that provides 1099s (for US tax returns) in addition to the T5s (for Canadian tax returns). This isn’t a concern for RRSPs since they are recognized as tax-deferred on both sides of the border.

    Best Canadian Brokerages for US Citizens

    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.

    2026 addition: IBKR – When I moved to Canada, InteractiveBrokers wouldn’t work with US citizens living in Canada, but I have heard that has changed. I’ve also heard some good things about them in terms of fees and functionality, but I haven’t done much research on them.

    As with picking a US brokerage that works with Canadian residents, 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.

    US Citizen Questions for Canadian Brokerages

    Do you allow US citizens to hold accounts with you?

    Answer we’re looking for: Yes.

    I’ve never encountered a brokerage in Canada that says no to this, but it’s worth asking.

    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.

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

    Answer we’re looking for: Yes.

    As of this writing, Wealthsimple, Questrade 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.

    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.

    What are the fees associated with your accounts?

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

    In Conclusion

    US citizens have ample choices when it comes to choosing a Canadian brokerage. The key is to ensure that the fees are low and that you’ll get the tax slips that you need.

  • Travel Hacking in Canada as a US Citizen

    Travel Hacking in Canada as a US Citizen

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    by

    Dave
    in

    When we first moved to Canada, I hung up my travel hacking hat. Between COVID and our new immigration, there was enough going on. After a year or so, though, I got the itch. At first, I looked at Canadian credit cards, but their sign-up bonuses were much more modest. That’s why I started researching how to use US credit cards to travel hack in Canada.

    The biggest challenge is physically getting the credit card. You’ll need to have a US mailing address you can use, and also a way to have that mail forwarded. To add a further wrinkle, mail forwarding services generally will not forward credit cards.

    Travel hacking is not for everyone. Some people find the record keeping and customer service interactions to be stressful. As someone who enjoys finding loopholes and inefficiencies, though, it can be very rewarding. I don’t keep formal records, but we have definitely saved between a few hundred to a few thousand dollars every year for the past 20 or so years by travel hacking.

    And since we’re talking credit cards here, let me be very clear — you should only be using credit cards if you always pay them in full every month. If you aren’t able to do this, no travel rewards are worth it. Auto pay is your best ally here.

    Using US Credit Cards in Canada

    If you’re a US citizen living in Canada, you have some really great options available to you. Travel hacking is all about sign-up bonuses, and the US sign-up bonuses are significantly better than their Canadian counterparts. You can travel hack a little with Canadian cards, but they tend not to waive first year annual fees and to have lower sign-up bonuses, so it’s a slower process.

    Thus, with my Canadian cards, I typically focus on no-annual fee cards that give specific perks — for example a PC Financial card for groceries or a Canadian Tire card that comes with roadside assistance. For travel rewards, I primarily use US credit cards.

    Since I’m a Canadian resident, I target US cards that have no foreign transaction fee. It’s worth checking whenever you sign up for a new card, but I have found that the exchange rate given by no foreign transaction fee cards is very fair. Thus, in addition to free travel, these cards also give me a way to take advantage of currency swings without exchanging money. I can use USD cards when the CAD is weak, and vice versa.

    Basic Travel Hacking Tips

    Chase’s 5/24 Rule

    Chase will typically deny you if you have opened 5 or more new credit cards (from any US provider) in the previous 24 months. I don’t believe that this total includes Canadian credit cards, and I have heard that some non-Chase business cards may also be exempt. Chase has several of the best cards, though, so erring on the side of caution with this rule is a good idea.

    If you’re married and you want to play this game, don’t add your spouse as an authorized user because that will count towards BOTH of you for Chase’s 5/24 rule. If my wife and I need to share a card, I’ll typically give my wife the physical card and put the virtual one on my phone.

    Keep Accurate Records

    This is definitely an area where keeping accurate records pays off. A couple of the key things to track are:

    • the downgrade or cancel date – If there’s an annual fee, I put a reminder on my calendar about 11 months out from my application date. At that time, I’ll call the company and ask if there’s a no annual fee alternative that I can downgrade to. If not, I’ll cancel the card. Increasingly, I’m finding that some companies will only allow you to downgrade if you’ve held your card for a full year. If this is case, I’ll bump out the calendar reminder and call them the day I’m eligible. Downgrading is preferred (as having longer duration cards on your account will boost your credit score) but cancelling a few cards is no big deal.
    • check spend date – I’ll also put a calendar reminder with the spend details (e.g. $3000 in the first three months) about a month before the deadline for the spend. That way, if I’m going to be short, I can plan some advance purchases like grocery gift cards.
    • bonus received date – For most cards, you can get the bonus again after 2 years. Some (like Chase Ultimate Rewards) have a 4 year wait, so be sure to check the fine print. Also, make sure to close the card 30-60 days before you re-apply. If you close a card and immediately re-apply, you’ll typically get denied.

    A Note on Business Cards

    You can get business cards without a formal business (e.g. for selling things on Craigslist, a website, etc.). That said, I find most business cards have foreign transaction fees so I haven’t used these since we moved to Canada.

    The Siren Song of Perfection

    As in most things, I aim for the Pareto Principle rather than relentless optimization. Some people take this VERY seriously (check out r/churning) but a lot of value can be had for pretty minimal effort. I typically get 2 or 3 credit cards per year for both my wife and I. It takes a few minutes to apply (and update my spreadsheet and calendar), some minimal intention to make sure we hit the spend, and then a few minutes to cancel or downgrade. In exchange, we get a significant number of free flights and hotel rooms every year. And if it stresses you out to juggle credit cards in this way, let it go.

    Best US Credit Cards for Travel Hacking in Canada

    Here are some of my favorite US credit cards for to use for travel hacking in Canada:

    Chase Sapphire Preferred – Ultimate Rewards are a great, flexible reward. You typically get the most bang for the buck with them by booking travel through their portal and paying with points. You can also transfer points to many airlines 1:1, which can be useful. There are other Chase Ultimate Rewards cards out there, but they typically have a bigger annual fee or a foreign transaction fee, so this is the only one I use as a Canadian resident.

    Chase IHG – This is the only hotel card I really bother with. Traveling with a family, Holiday Inn Express is a good fit. They typically have pools and free hot breakfasts. Depending on the exact bonus available, I sometimes get the free one (aka Traveler) but I like these points so much that I’ll often pay for the Premier version for the additional bonus, and then downgrade to Traveler after my first year. You get every fourth night free when staying with points, so these can add up fast.

    Amex Delta Skymiles – If Delta serves your local airport, this can be a good card to pick up.

    Chase Aeroplan – The bonus for the US card is typically significantly higher than what you can get for a similar card in Canada. I don’t love Air Canada, but they’re often the best / only option. This card also gives you 25K status, which may or may not be useful.

    Wrapping Up

    We find using US travel cards in Canada to be a great way to accumulate some free trips, but it does require a bit of work and isn’t for everyone. If you have any questions, please feel free to post them in the comments. Also, please let me know if you have other tips to share.

  • Choosing a US Brokerage as a Canada Resident

    Choosing a US Brokerage as a Canada Resident

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    by

    Dave
    in

    Finding a US brokerage for a Canadian resident can be challenging but it is doable. I strongly encourage you to do this BEFORE moving, as you will likely have more options at that point. Some brokerages allow you to keep accounts while living in Canada, but only to open these accounts while living in the US.

    Also, if you’re looking for advice on choosing a Canadian brokerage as a US citizen, we cover that as well.

    Key Considerations for US Brokerages for Canadian Residents

    A couple of key pieces of advice before we dive into the details:

    1. Laws and policies can change. A US brokerage that is willing to work with Canadian residents one day could change its policy the next. Thus, the recommendations below are not ironclad. And please let me know in the comments if you find that any of the below is out of date.
    2. Because things can change, I personally recommend having accounts at a couple of US brokerages that are willing to work with Canadian residents. I generally favor simplicity, but I’ll take the slight complexity having multiple accounts adds in this case. My rationale is that having multiple accounts gives you options if a policy changes and you need to transfer an account to in a hurry.
    3. Don’t lie about your address (e.g. by using the US address of a friend or family member). People do it but, to me, it is an unnecessary risk.
      • That said, if you have an account at a US brokerage that doesn’t work with Canadian residents, I would encourage you to transferring out the account instead of updating your address to your Canadian one.
      • And if you are lying about your address, I’d strongly recommend also using a VPN as I have heard a few stories about brokerages using IP addresses to flag people as being in Canada.

    Below, I’ll highlight some of the brokerages that I’ve found to be more Canada-friendly. I’ll also suggest some questions to ask when looking for a potential cross-border brokerage for US accounts.

    Rating US Brokerages for Canadian Residents

    FriendlySomewhat FriendlyUnfriendly
    Charles Schwab
    Interactive Brokers1    		Fidelity
    TIAA    		Vanguard
    • Friendly – These brokerages allow US persons to open accounts from Canada as new customers.
    • Somewhat Friendly – These brokerages allow US persons to keep existing accounts while in Canada. They may also allow existing customers to open new accounts.
    • Unfriendly – These brokerages either freeze or close all accounts belonging to US persons in Canada.

    By “accounts” in the above, I am primarily referring to retirement accounts. Few US brokerages are willing to hold taxable accounts for non-resident US persons. Some US citizens have kept taxable accounts with both Interactive Brokers and TIAA as Canadian residents, but my general recommendation for taxable accounts is to transfer them to a US-friendly Canadian brokerage. And again, these policies can and do change so please contact these firms directly to confirm.

    Canadian Residency Questions for US Brokerages

    Here is a list of questions that I would recommend asking potential brokerages to determine if they are a good fit for cross-border investing.

    Do you allow US citizens who are Canadian residents to hold taxable accounts and trade in them normally?

    Answer we’re looking for: Yes.

    This may be tricky to find, but it is possible that TIAA or Interactive Brokers may allow this. Regardless, the good news is that it’s easy to move your taxable account to Canada as a non-taxable event.

    Do you allow US citizens who are Canadian residents to hold retirement accounts and trade in them normally?

    Answer we’re looking for: Yes.

    Many US brokerages allow this, including Charles Schwab, Fidelity, and TIAA.

    Do you allow US citizens who are Canadian residents to open new accounts?

    Answer we’re looking for: Yes.

    This can also be tricky to find, but I’d recommend checking with Charles Schwab or Interactive Brokers. Other brokerages (like Fidelity) may allow you to open a new retirement account if you have an existing account of another type with them.

    If you need to open an IRA account to roll something over into and you’re not having any luck, another possibility would be to use IRA Financial and set up a self-directed IRA. This is a more expensive option than a traditional brokerage, but it could be useful in a pinch.

    What are your account fees and commission prices?

    Answer we’re looking for: As low as possible. All of the brokerages mentioned here are good but, depending on your investments, some might be better than others.

    1. Interactive Brokers is a bit less user friendly that the other brokerages referenced here, any may not be suitable for all DIY investors. ↩︎
  • How to Manage US Investment Accounts as a Canadian Resident

    How to Manage US Investment Accounts as a Canadian Resident

    —

    by

    Dave
    in

    There are a lot of opinions about what to do with US investment accounts when moving to Canada. On one extreme, some people recommend shifting everything to Canada (e.g. rolling IRAs into RRSPs). On the other extreme, you’ll find folks who recommend keeping US accounts where they are and using the mailing address of a trusted friend or family member.

    Generally speaking, my advice is to leave US accounts with US brokerage that works with Canadian residents. Personally, I would only use a friend or family member’s address for an investment account if I was traveling for a short time and didn’t have a true permanent mailing address.

    Below, I’ll get into the specific considerations for common US account types. And If you’re looking for cross-border implications for Canadian investment account types, please see this article.

    Taxable Accounts

    It is hard (but not impossible) to find a US brokerage that will let you hold a taxable (aka non-registered) account as a resident of Canada. Thus, for your non-registered account I generally recommend opening a US dollar account at a US-friendly Canadian brokerage and transferring your taxable holdings in kind (so it isn’t a taxable event).

    I’ll also do a future post on the cross-border implications for investments held in a Canadian taxable account as a US citizen, but in brief you’ll be OK holding your US-domiciled ETFs or stocks there.

    Traditional IRA, 401(k)s and 403(b)s

    Traditional IRAs, 401(k)s and 403(b)s are all tax-deferred retirement accounts where you contribute pre-tax dollars and don’t pay taxes until withdrawal, when these withdrawals are treated as income. They also all require participants to reach age 59.5 in order to withdraw funds without penalties.

    One key difference, though, between these accounts is their treatment under Canadian income splitting rules. After age 65, 401(k)s and 403(b)s are eligible for pension income splitting (and, potentially, the pension tax credit). IRAs, on the other hand, are explicitly not eligible for this. You can get more details here.

    Before moving, another consideration with these Traditional account types is whether or not it makes sense to convert them (if possible) to a Roth equivalent. This can be a great move, as taxes are typically lower in the US and Canada recognizes Roth IRAs as tax-free. Note that this conversion has to be done before you come a Canadian resident and will be taxable in the US. I’ll discuss the considerations for these conversions in a future post.

    Assuming you’re keeping your Traditional IRA, 403(b) or 401(k) when moving to Canada, you have a few options of how you could handle them.

    Keep them with a US brokerage that works with Canadian residents

    This generally what I’d recommend, and it’s a good idea to move these accounts to a Canada-friendly US brokerage before moving, if possible.

    Transfer the U.S. plan to an RRSP

    This is doable, but there are a number of conditions that must be met in order for it to make sense tax-wise. Specifically — you need to a) have enough additional cash to make up the taxes withheld by the US plan administrator in your RRSP contribution and b) owe enough in Canadian tax to offset the entire foreign tax credit generated by the roll-over. Again, this can be done but it usually isn’t worth it. For additional info on whether or not this might be useful in your particular situation, please see these links: Link 1, Link 2

    Withdraw a Lump Sum and Invest in a Non-Registered Account

    This is typically done as a last resort, due to the tax implications and potential penalties. If you’re of retirement age and the account is relatively small, though, it might make sense.

    For most people, #1 is a good approach, but it’s worth considering the other options.

    Roth IRA, 401(k) or 403(b)

    Roth IRAs, 401(k)s, and 403(b)s are all tax-deferred retirement accounts where you contribute after-tax dollars and don’t pay any taxes on gains or dividends even upon withdrawal. Like their traditional counterparts, they also all require participants to reach age 59.5 in order to withdraw funds without penalties.

    These Roth accounts are similar to TFSA accounts in Canada in some ways, but importantly they CANNOT be rolled over into TFSAs. Thus, with a Roth account, the best option is absolutely to keep it at a Canada-friendly US brokerage.

    The great news is that the CRA recognizes US Roth accounts, so your withdrawals will be tax-free in both the US and Canada. However, there are a couple of things that you need to do in order to make this work. Note that most of the documentation on the CRA page has to do with Roth IRAs, so it may be easier if you roll Roth 401(k)s or Roth 403(b)s into a Roth IRA before moving, if possible.

    Some key Roth advice:

    1. Do not contribute to your Roth account after you move to Canada. This will contaminate the account and render it no longer tax-free.
    2. File an election on your Roth account to the CRA when you file your initial tax return.

    If you do both of these things, you will be able to withdraw money from your Roth tax-free in Canada (after age 59.5), just as you would have in the US.

    457(b)s

    457(b)s are deferred compensation accounts. They are like traditional 403(b)s and 401(k)s in that they are employer-sponsored accounts to which you contribute pre-tax dollars. The growth isn’t taxed, and then withdrawals are ultimately taxed as income. The great advantage of 457(b)s for folks interested in early retirement is that there is no age requirement in order to make penalty-free withdrawals. In other words, as soon as you stop working for an employer, you can start withdrawing money (as income) regardless of your age.

    Because 457(b)s are less common than 401(k) or 403(b)s, there isn’t much in the way of official documentation on them from the CRA. The cross-border tax accountant I work with has said that even though it’s a bit of a grey area, it is ultimately in Canada’s interest to recognize them. If they do, they’ll be able to tax the future withdrawal as income. On the other hand, if they didn’t recognize them as tax-deferred they would only be able to tax the increase from the date you become a Canadian resident.

    So, similar to the Traditional IRA / 401(k) / 403(b), I would usually recommend leaving 457(b)s where they are. Depending on your current and future tax rates, it could be advantageous to draw down your 457(b) before moving and invest those assets in a taxable account instead.

    529s

    529s are not recognized by the Canadian government, and they are effectively treated as taxable brokerage accounts for Canadian income tax purposes. If possible, the most commonly recommended course of action is to transfer ownership of them to someone you trust who lives in the US.

    For More Info

    That’s a quick summary of some of the cross-border implications of several common US investment account types.