Dual Citizenship Tax Implications

KevinM · Post by **KevinM** » Sat Sep 11, 2010 10:01 am

I am a Canadian who is starting to apply for dual citizenship. By the time I retire I will of worked 17yrs in Canada and 23 yrs in US. In Canada I will have a pension from a Cdn employer, CPP and Old Age. In the US I will have 401k and social security. Current plan is to retire back to Canada
1)Any tax advantage to retire in US vs Canada
2)How will I be taxed on US income (401k, soc sec) when back in Canada. I don't believe I will be doubled taxed but will pay Cdn tax.
3)Also I understand it would be in my best interest before I move back to convert my 401k to a Roth. I will not be retiring for another 10yrs- should I be contributing to a Roth now rather then 401k?
4)Any other tax concerns I should be aware of?
Thanks in advance

nelsona · Post by **nelsona** » Sat Sep 11, 2010 11:02 am

1) Of course. You will only pay 15% Cdn tax on your CPP, pension and OAS (you won't get full oAS because you did not live 40 years as an adult in canada), and also report these on your US return, getting credit for the Cdn tax. The US tax rate is lower than canada, especially if yoy retire to a no state tax state.
Your oAS will not be subject to any clawback if you are in US.
2) These will be taxed in Canada, and 401(K) will be reported in US. canada will give credit for US tax on the 401(k).
3) You should eventually have as little taxable pension as possible.

nelsona · Post by **nelsona** » Sat Sep 11, 2010 11:03 am

Don't fund a TFSA

nelsona · Post by **nelsona** » Sat Sep 11, 2010 12:36 pm

If the choice is 401(k) or Roth, then 401(k) is still better (you may be able to do both depending on income). But if your firm as a roth401(k), you should probably be switching to that.

the less you have taxable if you move to Canada the better.

nelsona · Post by **nelsona** » Sat Sep 11, 2010 12:37 pm

And just so you know, your CPP will result i na reduced SS, regardless of where you live, due to WEP.

KevinM · Post by **KevinM** » Sat Sep 11, 2010 12:55 pm

Thanks for the information.

worryfreeinvestor · Post by **worryfreeinvestor** » Thu Mar 17, 2011 10:17 am

This is a pesky little bug with me but it bothers me whan I read someone write that they are "applying for dual citizenship" because there is no such thing. I know we use the term "dual citizen" in the vernacular, but you don't "apply to become a dual citizen": You apply to become a US citizen (while remaining a Cdn citizen).