Dual Citizen US resident - tax concerns in first year back?

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dualblues
Posts: 23
Joined: Tue Mar 16, 2021 1:50 am

Dual Citizen US resident - tax concerns in first year back?

Post by dualblues »

Thanks for your support!

I am a dual citizen, US resident of 20 years, returning to Canada. Please help alleviate my concerns with respect to year 1 taxes in Canada (2021).

1) In the first half of 2021, I will earn salary and stock from my employer. I will also realize capital gains since my stocks are "implicitly" sold (and basis adjusted) when I relocate to Canada. Am I correct in assuming that this income will not be reported on my Canadian tax return (since I was not a resident when I earned the income)?


2) I am consolidating retirement accounts and moving them to an expat friendly brokerage. This includes, doing several conversions: IRA to Roth IRA and 401k to Roth IRA. Roll-overs to IRA/Roth IRA. Note: conversions include pre-tax and post-tax monies (U.S. taxes will have to be paid on the pre-tax portion). Provided these transactions are completed prior to establishing residency in Canada - do they have any effect on my Canadian taxes? (aside from having to send a 1 time notification of Roth account to CRA).

Cheers
nelsona
Posts: 16947
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Dual Citizen US resident - tax concerns in first year back?

Post by nelsona »

1. Correct.
2. If you can get this all done before moving, you will be in good shape (except for the hefty US tax you will pay -- bu tthat is a wise move). Then those accounts should be tax free after you wait 5 years and 59.5. Remember, a new Roth requires you to wait 5 years for tax-free status.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
dualblues
Posts: 23
Joined: Tue Mar 16, 2021 1:50 am

Re: Dual Citizen US resident - tax concerns in first year back?

Post by dualblues »

Thanks for your response nelsona

That is good news! Good catch on the Roth restrictions (I am hoping to let mine "brew" for a long time before tapping it ;) )

Cheers
Diddos
Posts: 2
Joined: Fri Mar 19, 2021 8:19 am
Location: VA
Contact:

Re: Dual Citizen US resident - tax concerns in first year back?

Post by Diddos »

dualblues wrote:
> Thanks for your support!
>
> I am a dual citizen, US resident of 20 years, returning to Canada. Please
> help alleviate my concerns with respect to year 1 taxes in Canada (2021).
>
> 1) In the first half of 2021, I will earn salary and stock from my
> employer. I will also realize capital gains since my stocks are
> "implicitly" sold (and basis adjusted) when I relocate to Canada.
> Am I correct in assuming that this income will not be reported on my
> Canadian tax return (since I was not a resident when I earned the income)?
>
>
> 2) I am consolidating retirement accounts and moving them to an expat
> friendly brokerage. This includes, doing several conversions: IRA to Roth
> IRA and 401k to Roth IRA. Roll-overs to IRA/Roth IRA. Note: conversions
> include pre-tax and post-tax monies (U.S. taxes will have to be paid on the
> pre-tax portion). Provided these transactions are completed prior to
> establishing residency in Canada - do they have any effect on my Canadian
> taxes? (aside from having to send a 1 time notification of Roth account to
> CRA).
>
> Cheers


how was the issue resolved?
dualblues
Posts: 23
Joined: Tue Mar 16, 2021 1:50 am

Re: Dual Citizen US resident - tax concerns in first year back?

Post by dualblues »

Hi diddos

Based on nelsona's responses:

A dual citizen, US tax resident returning to Canada...

1) You don't have to report income (and capital gains) to CRA provided they are realized before you return to Canada (even if they are in the same tax year. You have more flexibility - you don't have to wait until the next tax year to avoid Canadian taxes on this income).

2) Roll-overs and conversions on US registered accounts (Roth IRA, IRA, 401k, Roth 401k) can also be done in the same year that you return to Canada. Provided they are done prior to establishing residency in Canada, they have no bearing on your Canadian taxes.

Good advice:
- don't forget to qualify your Roth distributions: 59.5 and 5 years for tax free status.
- don't forget to do one time registration of Roth with CRA.
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