RRSP rules for canadian non-residents

shsamardar · Post by **shsamardar** » Mon Nov 14, 2005 1:55 am

Dear ,

I am a canadian citizen that last year moved to USA to work.
I have H1B visa in here.

from CCRA standpoint, I am non residents.

I live in California now.

I have rental property in Canada and I am reporting Section 216 for that.

I have leftover not used RRSP from previous years.
Can I buy RRSP to reduce my canadian rental income for tax purposes?
if yes, how do I have to report this to IRS?

thank you very much
Sean

nelsona · Post by **nelsona** » Mon Nov 14, 2005 8:28 am

Any RRSP you have must be reported to IRS on form 8891.

While you could use RRSP, There is no point reducing your Cdn rental tax with an RRSP, since you do have to pay US tax on this income as well, so you will not be saving any money. You should be rather looking to reduce the tax by accurately accounting for NET rental income.

Remember that your RRSP is not recognized in California, so you will have to pay tax on any interst/dividends/gains you realze every year.

nelsona non grata... and non pro

Carson · Post by **Carson** » Mon Nov 14, 2005 10:41 am

Move along, nothing to see here. Just somebody asleep. Do not pay any attention to sleep talking.

[B)]

nelsona · Post by **nelsona** » Mon Nov 14, 2005 11:10 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">You can not deduct RRSP contributions on a S216 T1 return.<hr height="1" noshade id="quote"></blockquote id="quote">

Of couse you can, Carson[B)], see line 208 of T1159. This has always been the case.
http://www.cra-arc.gc.ca/E/pbg/tf/t1159/t1159-04e.pdf

The 216 guide also points this out. T4144
http://www.cra-arc.gc.ca/E/pub/tg/t4144/t4144-04e.pdf
The 216 return is pretty simple. Hard to miss one of 6 lines.[:I]

nelsona non grata... and non pro

shsamardar · Post by **shsamardar** » Mon Nov 14, 2005 7:58 pm

Thanks for replies

but if I make RRSP contribution, based on section 216, I can deduct those from my net rental income. therefore I will pay less tax to CCRA.

I am talking about $2500 profit that ends to almost $700 tax paid to CCRA.

Regarding income from RRSP, if I buy funds and hold them in RRSP, not seling them, other than small dividents,etc , is there any income?
Isn't income the result of gain from sell in this scenario?

If I sell the funds down the road but keep them in RRPS, based on your answers, from California view, it is gain/loss regardless of
having or withdrawing money from RRSP. is this correct?

What is your professional advice?

sincerely

nelsona · Post by **nelsona** » Mon Nov 14, 2005 11:41 pm

<blockquote id="quote">quote:<hr height="1" noshade id="quote">but if I make RRSP contribution, based on section 216, I can deduct those from my net rental income. therefore I will pay less tax to CCRA. <hr height="1" noshade id="quote"></blockquote id="quote">

Yes, but you are missing the point. You have to declare the full $2500 t oIRS and to California too, so you will not save a penny in overall tax, so your RRSP money will be wasted. save it for another time. You should use the Cdn tax you pay to reduce your IRS tax instead.

Gains and income in your RRSP are protected from IRS tax, by treaty, BUT NOT California tax. You should be looking to collapse your RRSP, not funding it more.

Besides, your RRSP manager probably will not accept any new RRSP money from you since you leaft Canada. Be sure to advise him that you are no longer resident of Canada

nelsona non grata... and non pro

shsamardar · Post by **shsamardar** » Tue Nov 15, 2005 1:58 am

thank you very much Nelsona for your wised advice