Hi I've been reading some topics on tax systems in US/CA but still have some questions on my situation, hoping to find some expert advice here.
I got a job offer and will be moving to NYC in May under TN visa. I'm not sure how long I'll remain in the US, but presumably short term (2-3 years) before coming back to Canada as I have family/friends in Toronto. I am single and under 30.
I want to make sure my assets are allocated before the big move and plan for 2016 tax filing, I have the following all in CIBC but will be moving some to TD or US accounts in other forms when I land as they have better US operation.
70k TFSA as US/Canadian stocks, mutual funds, ETFs with dividends (say $1000 annual dividends)
40k RRSP as US/Canadian stock, mutual funds, ETFs, GICs with dividends. ($1000 annual dividends)
80k in non-registered accounts as US/Canadian stocks, mutual funds, GICs, and cash saving ($1000 annual dividends/interest)
6k RPP held under Great West Life by employer, which I can keep as-is or transfer to a LIRA when I leave.
2008 Camry car valued at 10k or less (plan to keep this as-is in Canada)
1. On the TFSA and Canadian mutual funds handling, I do read everywhere that it will be treated as regular investment account by US and I should sell and withdraw all prior to entering US. However I want to find out and estimate the potential taxes as well to decide, is there a quick way to find out? The ACB will be based on the market value of the assets on the day I enter and then leave the US right? Or is it from the day of the transaction? My 70k TFSA has about 40k initial cost so I definitely don't want to be taxed on the 30k growth, but I will be willing to keep the TFSA if the US tax for the next 3 years will only be on the dividend income portion (1000 per year)
2. If I'm liquidating my assets from TFSA and investments, would it be a good idea to purchase a property in Canada so as to use the cash? It will be used by my family but under my name. It will be purchased after I become US resident and will not be sold during the time. I think this will allow me to also maintain Canadian resident status but I want to know if I will be taxed by the US when I sell the property assuming that I am no longer US resident in the future.
3. Also on the TFSA, if I have a loss in stocks in TFSA or investment accounts, should wait to sell after I land in US?
4. Property and cash asset wise, how does the currency fluctuaion work? Assuming my savings are 100k in USD after conversion when I enter in 2016 but with CAD dropping further, will I be subjected to any tax on the savings held in Canadian bank accounts?
Appreciate any inputs, thanks.
Canadian moving to US temporaily: Financial/Tax planning
Moderator: Mark T Serbinski CA CPA
1. The reason to abandon TFSA while in US is that it is not only taxable, but there are severe reporting and additional tax requirements that are, in my opinion, not worth the headache.
The reason to abandon any non-sheltered investment accounts is quite simply because the brokerages are not allowed to manage such accounts for US residents. Your broker may even insist upon it.
That said, the taxation of a TFSA account would not be the same as a non-registered account, simply because the TFSA was not exposed to deemed disposition upon departure from Canada, while other investments would. The ACB for TFSA would not be affected by departure, so if one would keep such an account, they would best crystallize any gains before moving (a similar approach would be done for RRSPs). Non-sheltered investments would "inherit" their deemed disposition value (tax would of course be owed in Canada upon departure, and US tax thereafter upon sale).
2. Property that you do not live in does NOT meet any treaty standard for tax residency. You would be "deemed" by CRA to have left Canada. The period in which you owned the property in Canada would be taxable in Canada. US taxation of holdings upon departure from US is usually for those who stay many years or have a Green card.
3. For TFSA, yes. Remember though that you will most likely have yearly marked-to-market gains in your TFSA under PFIC rules. For non-sheltered, it gets tricky, since you need to have a positive balnce on your deemed dispositions for IRS to accept this new cost basis. But for a few losers that would be fine. For Canadaian purposes both winners and losers are deemed disposed at departure. You would try to avoid a cap loss carry forward on your departure return, but especially a net loss on the items that are deemed disposed (for the IRS).
4. currency gains or losses are only triggered when the foreign funds are "used" for another purpose, and ignored if less that $200 for any particulatr transaction. So C$ left in Canada would only become taxable when they wereused to buy something, or exchanged to another currency.
The reason to abandon any non-sheltered investment accounts is quite simply because the brokerages are not allowed to manage such accounts for US residents. Your broker may even insist upon it.
That said, the taxation of a TFSA account would not be the same as a non-registered account, simply because the TFSA was not exposed to deemed disposition upon departure from Canada, while other investments would. The ACB for TFSA would not be affected by departure, so if one would keep such an account, they would best crystallize any gains before moving (a similar approach would be done for RRSPs). Non-sheltered investments would "inherit" their deemed disposition value (tax would of course be owed in Canada upon departure, and US tax thereafter upon sale).
2. Property that you do not live in does NOT meet any treaty standard for tax residency. You would be "deemed" by CRA to have left Canada. The period in which you owned the property in Canada would be taxable in Canada. US taxation of holdings upon departure from US is usually for those who stay many years or have a Green card.
3. For TFSA, yes. Remember though that you will most likely have yearly marked-to-market gains in your TFSA under PFIC rules. For non-sheltered, it gets tricky, since you need to have a positive balnce on your deemed dispositions for IRS to accept this new cost basis. But for a few losers that would be fine. For Canadaian purposes both winners and losers are deemed disposed at departure. You would try to avoid a cap loss carry forward on your departure return, but especially a net loss on the items that are deemed disposed (for the IRS).
4. currency gains or losses are only triggered when the foreign funds are "used" for another purpose, and ignored if less that $200 for any particulatr transaction. So C$ left in Canada would only become taxable when they wereused to buy something, or exchanged to another currency.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
[quote="nelsona"]1. The reason to abandon TFSA while in US is that it is not only taxable, but there are severe reporting and additional tax requirements that are, in my opinion, not worth the headache.
The reason to abandon any non-sheltered investment accounts is quite simply because the brokerages are not allowed to manage such accounts for US residents. Your broker may even insist upon it.
That said, the taxation of a TFSA account would not be the same as a non-registered account, simply because the TFSA was not exposed to deemed disposition upon departure from Canada, while other investments would. The ACB for TFSA would not be affected by departure, so if one would keep such an account, they would best crystallize any gains before moving (a similar approach would be done for RRSPs). Non-sheltered investments would "inherit" their deemed disposition value (tax would of course be owed in Canada upon departure, and US tax thereafter upon sale).
2. Property that you do not live in does NOT meet any treaty standard for tax residency. You would be "deemed" by CRA to have left Canada. The period in which you owned the property in Canada would be taxable in Canada. US taxation of holdings upon departure from US is usually for those who stay many years or have a Green card..[/quote]
Thanks for the quick response.
1. So I was hoping that the TFSA and the non-registered accounts income generated in 3 years (say 1000 per year) would yield an insignificant amount of tax owed to US, but based on your answer I still should withdraw them prior to entering US. In that case, should I attempt to transfer the cash generated into a US account if I wish to continue trading? What would be the consequence of that on the US/CA tax implication year by year and upon exiting US for good?
2. I'm currently living with parents and unless I manage to purchase a home and change my address before moving to US in 3 weeks, there's no way to remain a CA resident for CA tax purpose? I would still be a resident in the 2016 tax year, no? I was thinking of using the cash from TFSA to fund the purchase and it will be my first primary residence in canada and the retain the value, if I do this (weather before or after US entry) will there be any negative tax implication on US/CA side assuming I do not sell the property until I am no longer a US resident AND there is no rental income associated with it?
The reason to abandon any non-sheltered investment accounts is quite simply because the brokerages are not allowed to manage such accounts for US residents. Your broker may even insist upon it.
That said, the taxation of a TFSA account would not be the same as a non-registered account, simply because the TFSA was not exposed to deemed disposition upon departure from Canada, while other investments would. The ACB for TFSA would not be affected by departure, so if one would keep such an account, they would best crystallize any gains before moving (a similar approach would be done for RRSPs). Non-sheltered investments would "inherit" their deemed disposition value (tax would of course be owed in Canada upon departure, and US tax thereafter upon sale).
2. Property that you do not live in does NOT meet any treaty standard for tax residency. You would be "deemed" by CRA to have left Canada. The period in which you owned the property in Canada would be taxable in Canada. US taxation of holdings upon departure from US is usually for those who stay many years or have a Green card..[/quote]
Thanks for the quick response.
1. So I was hoping that the TFSA and the non-registered accounts income generated in 3 years (say 1000 per year) would yield an insignificant amount of tax owed to US, but based on your answer I still should withdraw them prior to entering US. In that case, should I attempt to transfer the cash generated into a US account if I wish to continue trading? What would be the consequence of that on the US/CA tax implication year by year and upon exiting US for good?
2. I'm currently living with parents and unless I manage to purchase a home and change my address before moving to US in 3 weeks, there's no way to remain a CA resident for CA tax purpose? I would still be a resident in the 2016 tax year, no? I was thinking of using the cash from TFSA to fund the purchase and it will be my first primary residence in canada and the retain the value, if I do this (weather before or after US entry) will there be any negative tax implication on US/CA side assuming I do not sell the property until I am no longer a US resident AND there is no rental income associated with it?
Those who move to US temporarily without getting a green card have an interesting opportunity, in that, any gains made while outside Canada will never be taxed by Canada, and any gains accrued but not triggered (by selling) while a resident of US will not be taxed either.
So, you could see yourself buying a entire portfolio in US, keeping it while in US, and selling after you cease US residence, to not be taxed on any gains made during the entire period by either country.
There is no point trying to pretend to live in Canada if you don't. Buy a place in US. You cannot make any claim of principle residence in Canada if you are not considered a factual resident, which you will not be from the day you move to US until the day you come back (residency is day-by-day, not year-by-year). It will be a cottage, subject to cap gains in Canada (and US if still resident there) when sold, at the very least for the time you were in US.
So, you could see yourself buying a entire portfolio in US, keeping it while in US, and selling after you cease US residence, to not be taxed on any gains made during the entire period by either country.
There is no point trying to pretend to live in Canada if you don't. Buy a place in US. You cannot make any claim of principle residence in Canada if you are not considered a factual resident, which you will not be from the day you move to US until the day you come back (residency is day-by-day, not year-by-year). It will be a cottage, subject to cap gains in Canada (and US if still resident there) when sold, at the very least for the time you were in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thanks
So onto your first point, that means I need to be a non-CA resident and invest in US vehicles using whatever cash I bring with me, and purchase until I cease being a US resident at which point I can cash out when I return to Canada?
In that case, do the investment need to be registered? Otherwise wouldn't any gains through selling be taxed by US during the period? Or do you mean a buy-and-hold strategy?
Also, what happens in the reverse case where there is a loss in the investment? I would assume I should sell and realize the loss prior to exiting US to claim some credit? Canada will have nothing to do with it right?
So onto your first point, that means I need to be a non-CA resident and invest in US vehicles using whatever cash I bring with me, and purchase until I cease being a US resident at which point I can cash out when I return to Canada?
In that case, do the investment need to be registered? Otherwise wouldn't any gains through selling be taxed by US during the period? Or do you mean a buy-and-hold strategy?
Also, what happens in the reverse case where there is a loss in the investment? I would assume I should sell and realize the loss prior to exiting US to claim some credit? Canada will have nothing to do with it right?
Discussed in detail elsewhere. You also have the option when returning top canad of undoing any deemed disposition if you retain the investment when you return.
I'm not going to get into this anymore, browse and see.
My advice is consistent:
Close TFSAs before moving 9preferably in the year before moving). Move non-sheltered stock to US broker, sell Cdn non-sheltered mutual funds (you can't transfer these). Crystalize any gains in RRSP before moving.
Any more info that that you can browse for.
I'm not going to get into this anymore, browse and see.
My advice is consistent:
Close TFSAs before moving 9preferably in the year before moving). Move non-sheltered stock to US broker, sell Cdn non-sheltered mutual funds (you can't transfer these). Crystalize any gains in RRSP before moving.
Any more info that that you can browse for.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thanks very much for your help, I've read through your suggestions and they make sense now. One thing I would like to clarify regarding the RRSP strategy. When you say crystallize the gains, do you mean sell the winning stocks and buy the same immediately again so that the cost is adjusted before entering US? I thought RRSPs are recognized by the US and the income/gains are excluded from reporting?
I also do not plan to withdraw any RRSP amount during my time in the US, will that matter at all?
I also do not plan to withdraw any RRSP amount during my time in the US, will that matter at all?
Crystallizing involves swapping funds not sell/re-buy.
As you say if you do not collapse your RRSP it won't matter, but many see the chance at taking out RRSP at 25% tax as a good deal. And some who left for a year never came back.
You want to make as little of your RRSP taxable in US if that happens.
As you say if you do not collapse your RRSP it won't matter, but many see the chance at taking out RRSP at 25% tax as a good deal. And some who left for a year never came back.
You want to make as little of your RRSP taxable in US if that happens.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing