1-I have RRSP/LIRA/TFSA accounts in Canada and I am planning in moving to California (San Fran) on TN visa and staying 3 years which makes me resident in the IRS eyes, and I read that I should report those to the the IRS, and they will tax me on those especially in California...what I should do for each account type?
2-Can I keep the RRSP in Canada? will California tax me on the state tax or the both federal and state tax on the earnings inside the RRSP?
3-Doe they treat the RRSP earnings the same as wage when it comes to tax bracket and calculations?
3-Also, to prevent double taxation, I have to cut ties with Canada and declare non-resident, but what I should do with my RRSP/LIRA/TFSA? if I keep my my TFSA will it continue to grow after cutting the ties with Canada?
4-My US employer is offering 401K, and I want to be able to transfer it to my RRSP in case I want to come back to canada? Can I do that?
You help in answering those question, will ease the stress level I have from this issue....
RRSP/TFSA/LIRA for TN Canadian in California
Moderator: Mark T Serbinski CA CPA
Couple of misconceptions. First, double taxation is avoided by tax credits, soi you could live in Canada and work in California, and you would not be double taxed.
Now, to the leaving Canada part.
First, read the emigrants guide from CRA. It explains the steps you need to take to sever ties in Canada.
For US taxation, your TFSA becomes taxable in US, and it is a reporting nightmare, so no point keeping it. Collpse it now, you can always replenish when you come back.
Your RRSP and LIRA can be held tax deferred FEDERALLY until you withdraw it. Unfortunately, cali is the only state that taxes RRSP/LIRA oni its internal income. So, you need to decide whther to just collapse the RRSP just after you leave. In abny case, before you leave you want swap any winning positions so that they have a higher cost basis. Your LIRA will be fully taxable in US if you withdraw iut there.
RSPs and LIRAS are subject to flat 25% Cdn tax if you withdraw.
cali treats the income like any other investment account: interst, dividends and gains.
Your 401(k) can't be transferred, but Canada will view it as a sheltered pension until you take it.
Now, to the leaving Canada part.
First, read the emigrants guide from CRA. It explains the steps you need to take to sever ties in Canada.
For US taxation, your TFSA becomes taxable in US, and it is a reporting nightmare, so no point keeping it. Collpse it now, you can always replenish when you come back.
Your RRSP and LIRA can be held tax deferred FEDERALLY until you withdraw it. Unfortunately, cali is the only state that taxes RRSP/LIRA oni its internal income. So, you need to decide whther to just collapse the RRSP just after you leave. In abny case, before you leave you want swap any winning positions so that they have a higher cost basis. Your LIRA will be fully taxable in US if you withdraw iut there.
RSPs and LIRAS are subject to flat 25% Cdn tax if you withdraw.
cali treats the income like any other investment account: interst, dividends and gains.
Your 401(k) can't be transferred, but Canada will view it as a sheltered pension until you take it.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Nelsona,
Can you explain "you want swap any winning positions so that they have a higher cost basis"
Also, can you explain "Canada will view it as a sheltered pension until you take it."
For earnings inside my RRSP and LIRA, will I be paying Federal taxes+ California state taxes on them or only California state taxes?
Can you explain "you want swap any winning positions so that they have a higher cost basis"
Also, can you explain "Canada will view it as a sheltered pension until you take it."
For earnings inside my RRSP and LIRA, will I be paying Federal taxes+ California state taxes on them or only California state taxes?
Your future IRS taxation of RRSP is based on its book value when you enter US, this you need to raise the book value in the account by selling investments that have gained value and buying other investments within the RRSP assuming you choose to defer IRS taxation on internal gains until you take the funds
The future IRS taxation of your LIRA will be the same as in Canada: fully taxable upon withdrawal, again, assuming you choose to defer IRS taxation on internal gains until you take the funds.'
Your current California taxation (you cannot defer in cali) will be based on internal gains, interest and dividends, so it would still be wise to bump up the cost basis of your investments in both RRSP and LIRA before going to US.
"Canada will view it as a sheltered pension until you take it." Can't make it any clearer than that . your US 401(K), IRA, pensions, will not be taxed in Canada until you make withdrawals, at which time they will be taxable in US and Canada, with Canada giving credit for uS tax.
As I explained above, RRSP and LIRA taxation is slightly different, RRSPs are not fully taxable in US upon withdrawal, LIRAs are. Non-residents if Canada can sometime=s be permitted to unlock their LIRAs.
I would suggest reading some more posts over the next few weeks and then asking further questions if necessary.
Nothing in your situation is different that dozens of people who have posted and been advised here in the past.
happy browsing.
The future IRS taxation of your LIRA will be the same as in Canada: fully taxable upon withdrawal, again, assuming you choose to defer IRS taxation on internal gains until you take the funds.'
Your current California taxation (you cannot defer in cali) will be based on internal gains, interest and dividends, so it would still be wise to bump up the cost basis of your investments in both RRSP and LIRA before going to US.
"Canada will view it as a sheltered pension until you take it." Can't make it any clearer than that . your US 401(K), IRA, pensions, will not be taxed in Canada until you make withdrawals, at which time they will be taxable in US and Canada, with Canada giving credit for uS tax.
As I explained above, RRSP and LIRA taxation is slightly different, RRSPs are not fully taxable in US upon withdrawal, LIRAs are. Non-residents if Canada can sometime=s be permitted to unlock their LIRAs.
I would suggest reading some more posts over the next few weeks and then asking further questions if necessary.
Nothing in your situation is different that dozens of people who have posted and been advised here in the past.
happy browsing.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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Ayrshireboy
- Posts: 2
- Joined: Fri Aug 22, 2014 4:46 pm
- Location: Rochester NY
Related to this, I have a question about how the cost basis is established in California. I have been a US resident for 8 years, living in New York state. I have deferred taxation on my RRSP's and I understand NY treats that in the same way as the Feds. In November, I will take up residence in CA and understand that I will pay tax on the gains in the RRSP there. Is the cost basis the same as the one that the Feds use which was established 8 years ago? Can I reestablish the cost basis before I move to CA?
That is a good point you have raised.
You will be taxed in cali based on the income generated within your RRSP while resident there, year by year. That means that you will be taxed on gains as if the RRSP didn't exist. So, I would be looking into how cali taxes new arrivers when they sell investements purchased long before they resided in califormia. I suspect that the entire gain would be taxable, not just the post-arrival gain.
As such, it would be in your interest to move around some of your winning RRSP investments before moving, and leaving your losers until after. Much like someone moving to US for the first time would do this to raise their RRSP "book value"
This of course will have no impact on your eventual taxation by IRS of your RRSP, since, as you say, the "cost" of your RRSP was determined long ago, and only will change with new contributions or withdrawals in/out of the RRSP. If you are living in cali when you withdraw RRSP funds, in the future, there will be no taxation of any RRSP amount, other than what gains are triggered by the selling of individula investments.
You will be taxed in cali based on the income generated within your RRSP while resident there, year by year. That means that you will be taxed on gains as if the RRSP didn't exist. So, I would be looking into how cali taxes new arrivers when they sell investements purchased long before they resided in califormia. I suspect that the entire gain would be taxable, not just the post-arrival gain.
As such, it would be in your interest to move around some of your winning RRSP investments before moving, and leaving your losers until after. Much like someone moving to US for the first time would do this to raise their RRSP "book value"
This of course will have no impact on your eventual taxation by IRS of your RRSP, since, as you say, the "cost" of your RRSP was determined long ago, and only will change with new contributions or withdrawals in/out of the RRSP. If you are living in cali when you withdraw RRSP funds, in the future, there will be no taxation of any RRSP amount, other than what gains are triggered by the selling of individula investments.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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Ayrshireboy
- Posts: 2
- Joined: Fri Aug 22, 2014 4:46 pm
- Location: Rochester NY
Another point occurred to me that I had not thought of before. On leaving NY state and taking up residence in CA, do I owe NYS any of the deferred tax or is it only incurred when a distribution is taken from the RRSP. If I take a distribution while resident in CA, I assume that I do not pay any tax to NYS.