The 90% of my retirement savings is in a 401K, 10% is in an RRSP. Strictly from a taxation perspective,
1. What penalty do I incur by retiring in Canada?
2. What happens if I retire in the US?
3. Is obtaining dual citizenship a first step regardless?
Canadian Citizen with US401k Tax Implications for Retirement
Moderator: Mark T Serbinski CA CPA
1. The only "penalty" is likely higer taxes on your RRSP, 401(k) and CPP/SS/OAS than if you retired in US.
2. You will pay 15% tax on your RRSP withdrawals, which wil be used towards your US taxation on RRSP. Your 401(k), OAS, CPP and SS will be taxed in US only.
3. Doesn't matter. I assume you hae green card. If you are only in US on a visa, then you don't have much choice. If you are planning to move back to canada and already have GC, then you should get citizenship.
You should also be looking at moving 401(k) over to Roth before returning to Canada.
2. You will pay 15% tax on your RRSP withdrawals, which wil be used towards your US taxation on RRSP. Your 401(k), OAS, CPP and SS will be taxed in US only.
3. Doesn't matter. I assume you hae green card. If you are only in US on a visa, then you don't have much choice. If you are planning to move back to canada and already have GC, then you should get citizenship.
You should also be looking at moving 401(k) over to Roth before returning to Canada.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Canadian Citizen 401K tax Implications on Retiring
Your input was very helpful. As a permanent resident of the US (Green Carded), and a Canadian citizen, what I understand is that the dual citizenship really is a requirement to lessen or remove extra taxation, or double taxation: on RRSP withdrawals sent to the USA, or on IRA withdrawals sent to Canada, depending upon where I finally settle for retirement.
Correct?
Thank you!
Correct?
Thank you!
No, this is not correct. Your US INCOME tax on your US-sourced income will always be less than the Cdn tax, and citizenship has little bearing on this. At best you are simply adjusting the way the 2 countries divvy up the Cdn tax.
In fact, if US taxrates were to rise, NOT being a US citizen might be helpful, as you would be protected by the treaty (US citizens have little treaty protection) to 15% tax. The treaty gives full protection against double taxation to Cdn residents who are not US citizens -- and you can always choose to bet reated as a US citizen for tax purposes, if that is best.
The only issue which US citizenship aids you in is in ESTATE tax matters, and this is marginal.
The real benefit of US citizenship over GC is maintainability once out of the US: GC will lapse within a couple of years abroad, while citizenship is permanent. As a retiree, if you lose your GC, there is little hope of ever getting it back, as you will not be able to be sponsored.
In fact, if US taxrates were to rise, NOT being a US citizen might be helpful, as you would be protected by the treaty (US citizens have little treaty protection) to 15% tax. The treaty gives full protection against double taxation to Cdn residents who are not US citizens -- and you can always choose to bet reated as a US citizen for tax purposes, if that is best.
The only issue which US citizenship aids you in is in ESTATE tax matters, and this is marginal.
The real benefit of US citizenship over GC is maintainability once out of the US: GC will lapse within a couple of years abroad, while citizenship is permanent. As a retiree, if you lose your GC, there is little hope of ever getting it back, as you will not be able to be sponsored.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
This is my last question, as you have resolved the taxation issue. Is there any truth to the rumor that either the IRS would "extra-tax" my RRSP withdrawals if I lived in the US, or that the CRA would extra-tax my IRA withdrawals if I lived in Canada? I was recently told that "either way, you are going to pay an additional 10% to the government to get your tax-deferred savings."
Thanks for your patience and interest!
Thanks for your patience and interest!
There is no "extra tax" per se. However, the way foreign credits are given in the US, it is possible that, if you are in a higher US tax bracket than the 15% Canada will withhold, that you may have to top off this amount to the IRS (and to the state). But remember, the portion of the RRSP that will be taxed in US is very small.
For canada, of course you will pay more Cdn tax on your US-sourced income. That is because your US-sourced income will be taxed at a lower rate than the Cdn/Provincial taxrate, so you will have to make it up on your Cdn return. That is the case for almost any income earned in US and taxed in canada.
The result is that -- if you live in canada -- your world income will always be taxed at US or Cdn rates -- whichever is highest. If you live in US, only your Cdn income will be taxed at a Cdn rate, while your US income will be taxed at US rates.
Thta is why it is crucial, if contemplating moving back to canada, to make as much of your US-source income tax-free: by converting to Roth.
For canada, of course you will pay more Cdn tax on your US-sourced income. That is because your US-sourced income will be taxed at a lower rate than the Cdn/Provincial taxrate, so you will have to make it up on your Cdn return. That is the case for almost any income earned in US and taxed in canada.
The result is that -- if you live in canada -- your world income will always be taxed at US or Cdn rates -- whichever is highest. If you live in US, only your Cdn income will be taxed at a Cdn rate, while your US income will be taxed at US rates.
Thta is why it is crucial, if contemplating moving back to canada, to make as much of your US-source income tax-free: by converting to Roth.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Canadian Estate Settlement
Could you advise me... I am a dual US/CAD Citizen who is inheriting a sum of money from my late mother's estate in Canada. I am a US resident. Final taxes have been paid to the Canada Revenue Agency. Are there any further Canadian tax penalties or payments I am going to have to make to have the money sent to my US bank account? In Illinois there are no inheritance taxes. Thank you for your reply!
There is no inheritance tax anywhere in north america. Moving money from one country to another does not incur tax.
The only thing you need to do in US , is report the inheritance on form 3520, but only if it exceeds $100K.
The only thing you need to do in US , is report the inheritance on form 3520, but only if it exceeds $100K.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best