First post here so a little intro for context.
I am a US citizen while my wife is a dual Canadian and US citizen. We both live in Europe. My salary comes from the States while my wife comes from Canada. She is officially consider a Canadian resident while I am not. Both her salary and status of resident in Canada just began this past year after 18 years of being "away". My wife started filing tax returns last year and we both file US joint tax return.
We are having our first child soon. She will be dual Canadian/US.
So we are considering starting a education fund for our little one. However, after a few hours on the internet searching, I was confused whether a 529 dividends and capital gains would be taxed in Canada. As far as I understand an RESP dividends and capital gains would be taxed in the US, correct?
If this is true that neither government recognizes the tax shelter of the other, would there be any advantage of starting either a 529 or RESP?
529 or RESP
Moderator: Mark T Serbinski CA CPA
Why is she a Cdn resident, if she lives in Europe?
The income from either plan is only sheltered in the country of origin (ie, 529 is taxable in Canada and RESP is taxable in US). That says nothing about how it may be taxable in your current country.!
Probably best to just set up a joint custodail invewstemnt account
The income from either plan is only sheltered in the country of origin (ie, 529 is taxable in Canada and RESP is taxable in US). That says nothing about how it may be taxable in your current country.!
Probably best to just set up a joint custodail invewstemnt account
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
[quote="nelsona"]Why is she a Cdn resident, if she lives in Europe?
The income from either plan is only sheltered in the country of origin (ie, 529 is taxable in Canada and RESP is taxable in US). That says nothing about how it may be taxable in your current country.!
Probably best to just set up a joint custodail invewstemnt account[/quote]
She is a permanent resident of Canada for tax purposes and only a temporary resident of Europe. Due to the fact that she is a US citizen she needs to file US taxes so we are filing taxes jointly.
So far we are not being taxed in Europe but that could change in the future.
One other question: I am thinking of taking my wife's name off of our joint taxable accounts in the States (she would then become the beneficiary). The reason is to make things simplier for taxes and to avoid the possibility of double taxation. Does this make sense?
The income from either plan is only sheltered in the country of origin (ie, 529 is taxable in Canada and RESP is taxable in US). That says nothing about how it may be taxable in your current country.!
Probably best to just set up a joint custodail invewstemnt account[/quote]
She is a permanent resident of Canada for tax purposes and only a temporary resident of Europe. Due to the fact that she is a US citizen she needs to file US taxes so we are filing taxes jointly.
So far we are not being taxed in Europe but that could change in the future.
One other question: I am thinking of taking my wife's name off of our joint taxable accounts in the States (she would then become the beneficiary). The reason is to make things simplier for taxes and to avoid the possibility of double taxation. Does this make sense?
You would need to look in the treaty of your curent country (if one exists), but living there and not in canada makes her a non-residnt of canada.
If you file jointly in US, then how your investment accounts are owned doesn't matter.
If you file jointly in US, then how your investment accounts are owned doesn't matter.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Solution
I have found a solution to the 529/RESP issue.
I will contribute more to my Roth 403b in the following years for the specific purpose of saving for our child's education. When I turn 59 1/2 years old, our girl will be 15. I then can roll the money into a Roth IRA. Or if I leave my job earlier I can do the same.
Then that money will be tax free for use of the child's education.
Anyone see any problems with this scenario?
I will contribute more to my Roth 403b in the following years for the specific purpose of saving for our child's education. When I turn 59 1/2 years old, our girl will be 15. I then can roll the money into a Roth IRA. Or if I leave my job earlier I can do the same.
Then that money will be tax free for use of the child's education.
Anyone see any problems with this scenario?