RMDs from US based IRA

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tedmac
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Joined: Sat Dec 12, 2020 6:28 pm

RMDs from US based IRA

Post by tedmac »

I am a retired dual US/Canadian citizen making my home in Vancouver. My entire working life was in the USA with US based companies. I have most of my assets in US based IRA accounts. How will future RMDs from those accounts be taxed ? I do not intend to renounce my US citizenship. Thanks for your reply ...
nelsona
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Re: RMDs from US based IRA

Post by nelsona »

As you are now doing, you will report world income on both your 1040 and Cdn return. Any withdrawals (RMDs or otherwise) from IRAs will be taxed in both countries, with Canada giving credit for upto 15% US tax.

Your IRA income cannot be split with your spouse on Cdn tax returns. Only actual company pensions or 401(k)s can be split.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
tedmac
Posts: 5
Joined: Sat Dec 12, 2020 6:28 pm

Re: RMDs from US based IRA

Post by tedmac »

Thanks for your reply. A couple of questions occur to me:

- My wife has her own IRA and I assume that she will be able to report withdrawals from her IRA as separate income in Canada ?
- All RMD withdrawals will be taxed twice as income, once in the US and once in Canada ?

I am new to retirement as you might have guessed. Again thanks!
nelsona
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Re: RMDs from US based IRA

Post by nelsona »

1. Yes your spouse's withdrawals will be taxed separately in Canada.
2. ALL your income , even now is taxed in both countries. No difference now except that you claim any tax credit for the US tax on the IRA on your Cdn return, rather than for the other Cdn income you have which you claim credits on your US return, using form 1116.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
tedmac
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Joined: Sat Dec 12, 2020 6:28 pm

Re: RMDs from US based IRA

Post by tedmac »

Another Question occurs to me after reviewing the previous replies. Is the limit on the foreign tax credit 15% of my US taxes on the RMD or 15% of my net foreign income ? After reading some of the CRA literature on this I am a bit confused. Thanks again.
nelsona
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Re: RMDs from US based IRA

Post by nelsona »

Technically the limit on the tax credit Canada gives on your pension income is 15%, since that is the UStaxrate that a non-US citizen residing in Canada would be charged for their pension income. But your effective taxrate in US on your income is likely less than 15%, so that shoudl not be a concern. However if it is, there are remedies to apply to reduce the US tax to 15%, so it matches your maximum Cdn credit.

There are other foreign credit limits on other US income that you might have: 0% for interest and cap gains, 15% for dividends, etc. You would need to determine the allowable credit on each type of income when determining your overall credit.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
tedmac
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Joined: Sat Dec 12, 2020 6:28 pm

Re: RMDs from US based IRA

Post by tedmac »

Thank you nelsona really useful information, I appreciate your time & expertise.
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