Roth 401(k) and Canadian Tax

[uscanadian]

Hi,
I am a Canadian who is working in the USA. In 2020 I started to put after-tax contributions in Roth 401(k).

I understand that pre-tax 401K are filed in RC268 and recognized by Canada. I would like to confirm that an after-tax Roth 401(k) amount can also be added as part of this.

From Section 1.26 of https://www.canada.ca/en/revenue-agency ... h-ira.html, I believe this to be so, in which case I would add both my 401(k) and Roth 401(k) contributions into my Line 1 of CRA's RC268

Keen to know if anyone has encountered this, and any thoughts

Thanks !
USC

[nelsona]

If you are a Cdn resident, you should not be contributing to a Roth, as they lose their tax-free status completely.

You should not include Roth contributions on the RC268 since they are not deductible.in either US or canada. And they should not lower your RRSP contribution room.

[nelsona]

The lection spoken about on the CRA page is not the same as RC268.

[uscanadian]

Thanks for the guidance. I'm still confused by 1.26 though:

1.26 There are several other types of U.S. retirement arrangements exempt from taxation under the Code that qualify as a pension under the Canada-U.S. Treaty, but that are not foreign retirement arrangements under the Act. These include, for example, 408(p) SIMPLE IRAs, 408(k) SEP IRAs, 401(a) plans, and 401(k), 403(b) or 457(b) plans (including Roth accounts).

Whether an individual should file the Election for such an arrangement depends on whether the income accrued in the arrangement is taxable under the Act on a current basis. This would require a complete review of the facts and terms of the particular arrangement. However, it is the CRA’s understanding that employers typically make contributions to such arrangements, in which case the arrangement will be characterized either as an employee benefit plan (EBP) or a retirement compensation arrangement (RCA), as those terms are defined in subsection 248(1). Because an individual who holds an interest in an EBP or RCA is not subject to current taxation under the Act on the income accrued in the arrangement, there is no benefit in filing the Election.

[uscanadian]

Also - see answer to Question 1 at thelink : https://members.videotax.com/technical- ... d-roth-ira

[nelsona]

Nothing new here. File the election as directed, and make no Canadian contribution, and your Roth will be treated as it is in US.

[nelsona]

You cannot deduct Roth contributions in US or canada, so why would you want to add these to your RRSP contributions in canada, reducing your future RRSP contribution room.

You are now stuck with non-tax-free Roth, much like a US resident with a TFSA.