If you own the home less than 2 years, the ENTIRE gain is taxable, not merely the amount over the exclusion, unless you meet one of 3 exceptions (job change, health, unforeseen). If you meet an exception, then your prorate the exclusion (months/24)
The only difference between less or more than 1 year is the taxrate (long-term vs. short-term cap gains).
Transferring Roth IRA & 401-K to Montreal, QC
Moderator: Mark T Serbinski CA CPA
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harjindermall
- Posts: 27
- Joined: Wed Nov 17, 2010 1:28 pm
- Location: Rolling Meadows
What is considered unforeseen events? For instance, in my situation, I have been looking for a company to sponsor me for a visa since October 2009 and could not find one so I'm moving back to Montreal.
My wife has the flexibility to work from home so she was thinking of moving back to Montreal and still work for that US company from Montreal and travel when she needs to. Is that something that she can do? Would that help reduce capital gain tax?
Does this example make sense:
Purchase price: $268,000
+ Home improvements: $40,000 ... Those can be added right?
= Total investment: $308,000
Selling price: $350,000
- Selling Fees: $15,000
= Final sell price: $335,000
Profit: $27,000 : Capital gain which may or may not be taxed ...
1. If I stay/live there for over 2 years then I'm not taxed on the gain
2. If I stay/live there for less than 2 years then I'm taxed on the gain
My wife has the flexibility to work from home so she was thinking of moving back to Montreal and still work for that US company from Montreal and travel when she needs to. Is that something that she can do? Would that help reduce capital gain tax?
Does this example make sense:
Purchase price: $268,000
+ Home improvements: $40,000 ... Those can be added right?
= Total investment: $308,000
Selling price: $350,000
- Selling Fees: $15,000
= Final sell price: $335,000
Profit: $27,000 : Capital gain which may or may not be taxed ...
1. If I stay/live there for over 2 years then I'm not taxed on the gain
2. If I stay/live there for less than 2 years then I'm taxed on the gain
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harjindermall
- Posts: 27
- Joined: Wed Nov 17, 2010 1:28 pm
- Location: Rolling Meadows
I have been speaking to different people and now I'm considering closing my Roth IRA. I contributed $14,000 and made only $136.03 in interest. I was told that I will be taxed only the interest. Fidelity has a $50 closeout fee. I will pay 10% early withdrawal fee and income tax. How do I determine my income tax if I have not worked for the whole year?
In addition, if I decide to close my 401K, what are the tax consequences of that? I have less than $20,000 sitting there.
I can definitely use that money in Canada to buy a house. Will there be any consequences bringing that money to Canada?
In addition, if I decide to close my 401K, what are the tax consequences of that? I have less than $20,000 sitting there.
I can definitely use that money in Canada to buy a house. Will there be any consequences bringing that money to Canada?
If you collapse Roth, you will be taxed only on the portion above your contributions, and this will be subject to penalty. Added to your income in year of withdrawal.
If you collapse 401(k), it is all taxable and 10% penalty on all of it, added to your income for the year.
If you are going to do this, make sure you do so before returning to canada, or it will be taxable there too.
That is why it is MUCH smarter to roll the 401(k) into Roth, and not pay penalty.
if you need the money later, take it out then and pay the penalty then, not now.
If you collapse 401(k), it is all taxable and 10% penalty on all of it, added to your income for the year.
If you are going to do this, make sure you do so before returning to canada, or it will be taxable there too.
That is why it is MUCH smarter to roll the 401(k) into Roth, and not pay penalty.
if you need the money later, take it out then and pay the penalty then, not now.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
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harjindermall
- Posts: 27
- Joined: Wed Nov 17, 2010 1:28 pm
- Location: Rolling Meadows
Isn't there a 20% income tax withholding penalty if you withdraw from your 401-K as well - in addition on paying a 10% early withdrawal fee?
So, I could withdraw my contributions only from the Roth IRA tax-free at the moment. Then I would roll over the 401-K into the Roth IRA and I have 2 years to pay the tax on that. Once everything is in the Roth IRA, I can leave the US and close the account when I need the money and pay only 10% early withdrawal penalty and income tax? Is that right?
So, I could withdraw my contributions only from the Roth IRA tax-free at the moment. Then I would roll over the 401-K into the Roth IRA and I have 2 years to pay the tax on that. Once everything is in the Roth IRA, I can leave the US and close the account when I need the money and pay only 10% early withdrawal penalty and income tax? Is that right?
Why would you collapse the roth and then re-fund it with 401(K).
As I said, regardless of what is withheld when you first take the 401(k), you will add the withdrawl to your income and pay tax on it. The withholding may or may not cover that tax.
As I said, regardless of what is withheld when you first take the 401(k), you will add the withdrawl to your income and pay tax on it. The withholding may or may not cover that tax.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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harjindermall
- Posts: 27
- Joined: Wed Nov 17, 2010 1:28 pm
- Location: Rolling Meadows
Here's what I'm trying to do...
Roth IRA:
I contributed $14,000 and made $136.03 in interest. I want to transfer $14,000 to my bank account and leave the $136.03 in the Roth IRA. The $14,000 will be tax-free. I can transfer that money to Canada and invest it.
401-K:
I want to transfer the full amount to my existing Roth IRA which will already have the $136.03 in it. I will pay the taxes over the next 2 years.
Roth IRA:
I contributed $14,000 and made $136.03 in interest. I want to transfer $14,000 to my bank account and leave the $136.03 in the Roth IRA. The $14,000 will be tax-free. I can transfer that money to Canada and invest it.
401-K:
I want to transfer the full amount to my existing Roth IRA which will already have the $136.03 in it. I will pay the taxes over the next 2 years.
Just as an FYI for all, I had a similar discussion with Fidelity U.S who currently holds Roth and Traditional IRAS for myself and my wife. They said exactly the same things tm me that they said to harjindermall.
They are fine with it but you lose most of the "electronic" means of working quickly & efficiently with your account. It should be fine for the average retirement investor doing some rebalancing here and there but not too much active management.
At any rate, at least we know that that two different people asking the same thing are getting the same answer. I take that to be somewhat of a good sign that the policy is well understood and the situation is managed reasonably well.
They confirmed that they [b]currently[/b] have U.S retirement accouts owned by non-resident Canadians.
They are fine with it but you lose most of the "electronic" means of working quickly & efficiently with your account. It should be fine for the average retirement investor doing some rebalancing here and there but not too much active management.
At any rate, at least we know that that two different people asking the same thing are getting the same answer. I take that to be somewhat of a good sign that the policy is well understood and the situation is managed reasonably well.
They confirmed that they [b]currently[/b] have U.S retirement accouts owned by non-resident Canadians.