Help needed for Roth/HSA with Cross-Border Tax Residency

[momo_god]

I’m a PR who recently started working in the US on F-1 OPT. I’m also in the middle of a family sponsorship process for my spouse to come to Canada, which I hope will be finalized later this year.

I currently split my time between the US and Canada—I live near the border and commute weekly (US midweek, Canada on weekends). My job requires one in office 2–3 days per week. I "stayed" and "lived" in Canada to sponsor, and maintain my PR as well.

Questions:
- Technically, I could be consider "deemed NR" in Canada, but once my spouse comes, I believe I would have to be tax resident anyway for such extended stays. But I am not sure if deemed NR status would block the family immigration application.

- Should I max out roth 401 (thru megaback door)? I am concerned about the "Canadian contribution" for Canadian tax residents. If I am considered (ruled by CRA or self-reporting) to have "Canadian contribution", do I even have to pay taxes on unrealized earnings annually? What happens if I become an NR in several years, say moving to US as a family, is it still taxable? How about years later, when I return to Canada?

- Should I max out HSA? There are several insurance options, but only one is HDHP which offers HSA with employer contribution (free money), I tend to choose that. On top, should I make any employee contribution?

Thank you!

[nelsona]

By regularly returning to Canada, you are NOT a "deemed non-resident". You are a Cdn resident, and should act accordingly with regards to Roth contributions.

[momo_god]

Hey Nelsona, I do plan on filing tax returns as a CDN tax resident. I just came to a new job in the us but like to set up benefits in a proactive way, so it would be next year's return.

After reviewing many discussions on this forum, I think the best for commuters would be:
- Don't contribute ROTH 401k AT ALL. However, I am thinking of someone who would retire in the US, does it make sense to contribute? I guess not though, as departure tax would be imposed...
- Max out HSA, despite being not tax-deductible in CDN. My understanding is that the account would remain as a mini TSFA, while Roth is supervised TSFA (for US residents)

feel free to correct me if wrong!

[nelsona]

I would avoid roth401(k) until you move to US. Sick to 401(k)Btw, you cannot do a "backdoor" Roth401(K) contribution. That is only for Roth IRAs.

Maxing your HSA (assuming you have a high deductible Medical plan, is good, but realize that for the most benefit is should be used strictly for eligible medical expenses.
Be careful however, non-resident aliens are not permitted to enroll in an HSA. You can use a previously funded one if you leave US, but not fund it.

I guess in your situation, as a CDn, you can file a 1040, respoecting all the rules of that form, but whether this makes you eligible for have an HSA is doubtful.

The fact that you are wanting to sponsor someone into Canada, makes your choices limited.

[momo_god]

Yes, this is pretty much aligned with my thought.

For roth 401k, what i meant was in-plan conversion. Thanks for correcting my wording. Anyway, either conversion or backdoor should be avoided in commuters' case. I guess people can make good use of tsfa instead.

Thank you again!

[nelsona]

For in-plan conversions, you had best check with your administrator, as this is certainly not a universally available option for 401(k) plans.
Again, though, I would not suggest you do this until you are a Cdn non-resident.