Roth conversion as a Canadian resident

[Gilgamesh]

Dual citizen, soon to be Canadian resident after over two decades of living in USA.

I will be 53 when I move back to Canada. I will have savings to live off of until 59.5 when I’ll start withdrawing from my retirement accounts.

Can I do Roth conversion as a Canadian resident for those six years when I don’t have any other taxable income?

After age 59.5, in Ontario my marginal tax rate (based on todays figures) will be 43.41%. First $46,226 combined tax rate currently is 20.05%. So it might be better to do Roth conversion for at least CAD$46,226 and incur taxes now to avoid 43.41% taxes later.

But will doing a Roth conversion as a Canadian resident mess up my tax free status of Roth (I believe making Roth contribution will)?

If it’s allowed, will my USA institution hold any taxes and I assume I will get tax credit to apply in the Canadian tax return.

Thanks

[nelsona]

You should NOT do any conversions to Roth as a Cdn resident, as that causes the Roth to be "broken" in Canada, meaning that the internal income becomes taxable each year.

So, you should think hard about doing a big conversion BEFORE moving, taking the tax hit now in US, and then that money will be completely tax-tree in both Canada and US once you are 59.5 (and have opened the account for 5 years).

May even be worth staying in US a little longer to spread the conversion over 2 tax years.