CPP and RRIF Distributions

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Cdninga
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CPP and RRIF Distributions

Post by Cdninga » Thu Jun 25, 2020 6:43 pm

I moved from Canada to the US over 30 years ago and have been a US citizen for a long time. While in Canada I worked for 5 years and am now eligible for CPP payments. I also had an RRSP that I converted to a RRIF last year and must start taking distributions this year. I plan to withdraw less than 10% of my RRIF each year to ensure that my Canadian non-resident tax rate withheld stays at 15%. I understand that the foreign tax credit on my US return will be less than the actual tax withheld in Canada, My question is, can CPP payments count towards foreign income and therefore increase the amount of the foreign tax credit that I can claim on my US return.

nelsona
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Re: CPP and RRIF Distributions

Post by nelsona » Sat Jun 27, 2020 9:29 am

As you realize your CPP will not be taxable in Canada, only in US, and only at the 85% inclusion rate, like SS. That said, I consider CPP to be CDn-zourced even though it was not taxed in US (unlike Canada which views income that is not foreign taxed has NOT foreign-sourced), so you can include it in your foreign income.

Remember that your RRIF is 100% taxable in US. It is not treated like a personal RRSP.
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nelsona
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Re: CPP and RRIF Distributions

Post by nelsona » Sat Jun 27, 2020 9:32 am

Sorry, I meant to say that if your RRIF was at one point a locked-in RRSP (LIrA) from a work pension, it is 100% taxable. If it was your personal RRSP, some of it will be non-taxable. Given you have had it for 30 years, I'm sure the amount you had when you arrived in US was quite small, that portion os not taxable in US.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Cdninga
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Joined: Thu Jun 25, 2020 6:34 pm

Re: CPP and RRIF Distributions

Post by Cdninga » Sat Jun 27, 2020 9:58 am

Thanks for your response. I think I will start taking CPP payments this year as it will allow me to recoup a little more of the foreign tax credit that I'm due from my RRIF distributions. My RRIF contains funds from both a personal RRSP and a LIRA. I have read many of your posts over the past few years regarding the cost basis of both types and have done the calculations accordingly. My non-taxable portion of the personal RRSP is in fact very small. (But every little bit helps).

Thanks again.

nelsona
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Re: CPP and RRIF Distributions

Post by nelsona » Mon Jun 29, 2020 10:22 am

Yeah, so only that FMV from 30 years ago is non-taxable, prorate it over the entire value at start -of year multiplied by the amount you take, all in USD of course.
Treating the CPP/OAS as foreign source is certainly an advantage if you have other foreign income. That and the 15% withholding should mesh your taxes pretty well, without too much carryforward. Even if your CPP is probably miniscule. Have you figured out your eligibility for OAS at 65?
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nelsona
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Re: CPP and RRIF Distributions

Post by nelsona » Mon Jun 29, 2020 10:49 am

Assuming you do not return to Canada, you are eligible for (X-18)/40 of full OAS, where X is the age you left canada. Canada will grant you the years you worked in US towards the 20 years you need for eligibility outside canada, but not towards the 40 years for maximum payout.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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