Canadian in the US contribution RRSP for the departure year

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
sedona
Posts: 17
Joined: Fri Jan 26, 2018 11:48 pm

Canadian in the US contribution RRSP for the departure year

Post by sedona » Sat Jan 27, 2018 12:29 am

I moved to the US around mid last year(2017). I have some CAD income during the first half of the year(2017) and I have some unused RRSP contribution room.

Is there any penalty of any sort or any taxation issue if I contribute before March 1st 2018 to be deducted for the 2017 tax year?

Thank you

totality6666
Posts: 15
Joined: Sat Nov 18, 2017 6:39 pm

Post by totality6666 » Sat Jan 27, 2018 9:18 am

You can always reduce your Canada income for 2017 through RRSP contributions. However, you can't reduce your US income through them.

Hence, if you file 1040 in US 2017, whatever savings in Canada would be paid to US (as you declare world income), and would not bring immediate tax savings.

However, if you file 1040NR, then you don't have to declare non-US income and hence it does make sense to contribute in this case.

nelsona
Posts: 16184
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Sat Jan 27, 2018 9:24 am

Most emigrants to US can benefit from making an RRSP contribution for that year if their RRSP trustee lets them

Even if filing a 1040, the cdn tax saved will not adversely affect their US tax since most use 2555 to exclude cdn wages rather than foreign tax credit.

If you are married it is almost never useful to filev1040NR in entry year unless you arrive very late in year
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

totality6666
Posts: 15
Joined: Sat Nov 18, 2017 6:39 pm

Post by totality6666 » Sat Jan 27, 2018 9:31 am

Right, my reply is appropriate only if canada income is too high to be excluded on 1040 using foreign income exclusion.

nelsona's answer is more appropriate in the general case

sedona
Posts: 17
Joined: Fri Jan 26, 2018 11:48 pm

Post by sedona » Sun Jan 28, 2018 6:58 pm

Can you clarify what you mean by "Hence, if you file 1040 in US 2017, whatever savings in Canada would be paid to US (as you declare world income)"?

My income is from the first half of 2017 and I don't have any employment income in Canada after Mid 2017. The tax refund that I'll get from the CRA needs to be reported a s an income in the US?

totality6666
Posts: 15
Joined: Sat Nov 18, 2017 6:39 pm

Post by totality6666 » Sun Jan 28, 2018 8:23 pm

No - your tax refund doesn't have to be reported to IRS.

What I meant is that if your canadian income is higher than the pro-rated foreign income exclusion amount on 1040, then reducing your canadian income through RRSP contributions would not reduce your US world income, and so you would not save taxes by doing RRSP contributions, because the US world income would not be reduced.

The above applies only if you made a canadian salary that is more than 102k USD * FX rate * # of months in canada / 12.

If your canadian income is lower than that, then RRSP contributions are definitely reducing your tax burden.

nelsona
Posts: 16184
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Mon Jan 29, 2018 10:09 am

It is not quite as simple as applying a formula, as US tax credit would also depend on US income, Cdn income, and the proportion each is of world income.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Post Reply