Canada to US on TN, and back again

[catweazle6666]

Canadian moving to the US on TN. Plan to move back to Canada after 2 or 3 years. How can I optimize my assets for the move?

My family (wife and children) plan to remain in Canada for the time being.

TFSA: C$100k
RRSP: C$100k
RESP: 2x C$10k
Non-registered account: $50k in Canadian ETFs.
Own house in Greater Toronto.

I don't plan to contribute to or withdraw from any of these while US resident.

Thanks !

[nelsona]

You first need to determine if you will be able to break Cdn tax residency. By having a house and spouse in Canada, one must take extraordinary measures to become a "deemed non-resident" and to be treated as a non-resident.

[catweazle6666]

Thank you for replying, nelsona.

I am planning to move from Toronto to the Bay Area for a big tech job, but my family does not want to join me. What are these extraordinary measures, and what happens if I cannot meet them? Will I be taxed twice, or worse?

[nelsona]

To be a deemed non-resident (DNR), you need to meet the treaty definition of US residency, which means, in your case, making US your centre of vital interests,

In short, in means that you should not visit your family in Canada, they should visit you. Your trips to Canada should be VERY limited and NOT for family reasons. Otherwise CRA will view your centre of vital interest as Canada, and not grant you DNR status.

[catweazle6666]

Very interesting to learn, thank you !

What happens if I visit my family often in Canada, and I'm deemed a Canadian resident? Will I be taxed by both Canada and the US? Would I be liable for anything beyond whatever tax rate is the highest? Is this very onerous or dangerous (risk of penalties) ?

[nelsona]

You will be taxed in all jurisdictions, with credit given in Canada on the taxes you owe in US and Cali.

In California only, RRSPs are not protected, so you will pay Cali tax on your RRSP internal income, and IRS and Cali tax on your TFSA internal income.

[catweazle6666]

Thanks ! I can get rid of the TFSA, but the RRSP I need to keep, or I'll lose the accumulated room. Does California tax the RRSP income only, or also the capital gain? Sounds expensive...

Do I use 1040 or 1040NR to file my US taxes? Is it even doable to track this myself, or are we far beyond DIY territory here? My salary contains stock grants, possibly another headache?

[nelsona]

Cali taxes ALL internally generated income, including any triggered cap gains. A good practice is to bump up the book value of your RRSP holdings by swapping them into other investemtns before leaving for California.

As to how you will file in the first year in US, there are dozens of posts on that, and will depend on your Cdn status as well.

[catweazle6666]

Thank you for sharing your considerable expertise Nelson, it's much appreciated. Reading your responses and searching the forum, I'm coming to the conclusion that this is far beyond DIY territory for me. Life is short, and I have a move to California to prepare. Sounds like my next step should be a professional tax firm.

[nelsona]

Sure.
Just be warned that it'll cost you north of $1500 for that per year.