RRSP contribution 2016 as non-resident

jixca · Post by **jixca** » Thu Feb 09, 2017 7:18 pm

Hello

I moved to US as TN status in may 2016, new US employer.

I will file tax for Canada as usual and declare departure date of 05/2016 with Canadian income until then.

US side I will likely file 1040 and NY state tax with my US+Canada income for all of 2016 and claim the tax paid to CRA as foreign tax credit, unless 1040NR is more favorable. Although I do have investment/TFSA/bank accounts that need to be reported as FBAR but that's another thing.

Question, is my basic assumption above correct?

Can I also contribute to my maximum allowable room for RRSP in 2016 before March 1 and deduct that from Canadian income? Can that be reported in US return?

nelsona · Post by **nelsona** » Fri Feb 10, 2017 10:24 am

Your NT state tax should not have any Cdn income, since you can and should file part-year for state. Federal full-year is best if you are married.

You can never claim private RRSP contributions on a US return. Your only reason to contribute for 2016 would be to reduce Cdn taxes, which is probably not mch of an issue. Besides, few RRSP companies will accept new money from US resident (you have of course informed all your banks/financials that you are US resident since may)

jixca · Post by **jixca** » Fri Feb 10, 2017 5:28 pm

Thanks,

But, given RRSP is sheltered in both US/Canada, wouldn't it be wiser to maximize it for longer term purpose? Assuming a 100% in capital gains say 10 years later, putting that money in RRSP in Canada vs unregistered in US, the latter will require reporting regardless of what my status is in US right?

nelsona · Post by **nelsona** » Fri Feb 10, 2017 9:53 pm

Growth in your RRSP will be taxed at regular rates in US and the entire amount will be taxed at 25% (or if you wait that long -- 15%) in Canada when you begin withdraw. So expect at 40% taxarte on the growth when all is said and done.

Putting the money in cap gains producing non-sheltered investments, and even tax-free ones like a Roth or your home would make more sense from a tax point of view.

Really, You should be considering collapsing your RRSP at 25% tax and not maximizing it, One last contribution could be considered in departure year, but only if your tax rate is in the high 30% range, which is unlikely given you only spent 4 months working in Canada in 2016.

But, as I said, this may be moot, since most brokerages do not permit contributions by US residents.

jixca · Post by **jixca** » Mon Feb 13, 2017 11:09 am

One more thing, I am single but since I moved in May I've exceeded 183 days presence test for 2016, so I have to file full year 1040 right? Or is it better to file 1040NR and save the hassle of FBAR/8938 reporting?

nelsona · Post by **nelsona** » Mon Feb 13, 2017 11:15 am

Well, you cannot file 1040NR for the entire year.

You can either file 1040 full year, or 1040 part-year (known as dual-status, which is rarely advisable), and either way you would need to report all foreign accounts, holdings, trusts etc, if you held them anytime after the first day you were in US in 2016.