Hi All, Thanks for all wonderful input on cross border taxation issues in this forum and special thanks to 'Nelson'. Just want to highlight one specific scenario and seek your advise.
-I am Canadian citizen but also a US GreenCard holder who work/live in US.
-Also Canadian tax resident because of strong tie to Canada (family and few rentals in Canada). Factual resident.
-Hence I am tax resident for both US/Canada and paying income taxes to both countries.
I plan to open a Roth IRA or Roth 401k in US and contribute to it.
Will Canada tax earnings of Roth IRA and Roth 401k?
Does Canada differentiate between a resident and factual resident as far as Roth products are concerned?
Thanks in advance for any insight on this.
Roth IRA for Canadian Factual Resident
Moderator: Mark T Serbinski CA CPA
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rao_manoj2004
- Posts: 14
- Joined: Sat Feb 12, 2022 11:50 am
Re: Roth IRA for Canadian Factual Resident
First, there is no tax difference, in any aspect, between a "factual resident" and a resident. You would be treated as if you never left Canada, you were simply earning foreign income from "commuting" to the US.
Second, It is doubtful that you are a "factual" resident in canada, if you actually live and work in US. Only IF you make frequent visits to canada to visit SPOUSE would you remain Cdn resident. Your investments don't really enter the equation. Otherwise you would be a deemed NON-resident by treaty, which is treated like a non-resident. A deemed or treaty non-resident is someone who has "some" ties in Canada (like you described) but has MORE residential ties in US than in Canada, meeting the treaty definition of a US resident.
In any event, if you consider yourself still a resident (and CRA could at any time "push" you into non-residency to get your departure tax) and contributed to a Roth you would be making what is known as a "Canadian contribution" to a Roth, which would essentially break the tax-sheltering of growth in the Roth. This would require you to report earnings on your Cdn residential return as if it was an ordinary investment account -- for any year in future in when=cj you were considered resident of Canada.
So, you CAN contribute to a Roth, but realize that you will not be sheltering the growth should you continue to be resident in Canada or should you eventually return to Canada in future,
Second, It is doubtful that you are a "factual" resident in canada, if you actually live and work in US. Only IF you make frequent visits to canada to visit SPOUSE would you remain Cdn resident. Your investments don't really enter the equation. Otherwise you would be a deemed NON-resident by treaty, which is treated like a non-resident. A deemed or treaty non-resident is someone who has "some" ties in Canada (like you described) but has MORE residential ties in US than in Canada, meeting the treaty definition of a US resident.
In any event, if you consider yourself still a resident (and CRA could at any time "push" you into non-residency to get your departure tax) and contributed to a Roth you would be making what is known as a "Canadian contribution" to a Roth, which would essentially break the tax-sheltering of growth in the Roth. This would require you to report earnings on your Cdn residential return as if it was an ordinary investment account -- for any year in future in when=cj you were considered resident of Canada.
So, you CAN contribute to a Roth, but realize that you will not be sheltering the growth should you continue to be resident in Canada or should you eventually return to Canada in future,
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 