First I just want to say thanks for the existence of this very informative and helpful forum.
I am a Canadian and US citizen who was living in California for 20+ years up until April this year. I have $10k in wages ( with taxes already witheld) and $40K in capital gains from ETFs. I am now in the process of moving all my brokerage accounts to Canada. I also have an old RRSP that I haven't touched or reported on since the 90s. My questions are:
1. If I stay in Canada for the rest of the year (April through December), do I still need to pay capital gains tax in the US? I'm worried my capital gains will be double taxed since the CRA foreign tax credit will probably not cover all the taxes I will have to pay in the US if I did have to pay US capital gains.
2. I plan to start reporting FBAR and FATCA and Fincen (not sure if there's more), but to get around previous years non-compliance, can I just close all my old Canadian bank accounts and open completely new ones?
3. If I cash out my old RRSP this year, do I still need to report it on FBAR, FATCA, fincen?
4. Can I still contribute to my US IRA account as a Canadian resident?
Thanks again for all the help and advice!
E
Capital Gains FBAR and FATCA
Moderator: Mark T Serbinski CA CPA
You will always have to pay cap gains in US, as a US citizen. Once you live in Canada, the tax you owe to Canada can be used against any US tax.
When you move to Canada all your assets are re-valued at moving date value
Moving your assets (unchanged) to Canada does not trigger cap gains, only selling them does.
2. Did you never report your RRSP internal income to California?! that was required.
Simply renaming the account doesn't change this.
3. Yes, and you will need to report the growth over the past 20 years as taxable in US.
4. No.
When you move to Canada all your assets are re-valued at moving date value
Moving your assets (unchanged) to Canada does not trigger cap gains, only selling them does.
2. Did you never report your RRSP internal income to California?! that was required.
Simply renaming the account doesn't change this.
3. Yes, and you will need to report the growth over the past 20 years as taxable in US.
4. No.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks Nelsona, for #4: I'm hoping by continuing to contribute to my IRA I will be able to reduce my taxable income in the US since short term capital gains rates are higher in the US than Canada. I will also benefit hopefully from the continuing tax free gains of my IRA until I take distribution.
In a previous thread, I recall you had mentioned that a Canadian resident can shelter their US capital gains from US taxes by filing using the 1040NR and only paying in Canada. Again, what I'm trying to avoid is double taxation. If I really have to pay US cap gains then so be it, but I don't think Canada's foreign income tax credit will be enough to prevent me from being double taxed.
In a previous thread, I recall you had mentioned that a Canadian resident can shelter their US capital gains from US taxes by filing using the 1040NR and only paying in Canada. Again, what I'm trying to avoid is double taxation. If I really have to pay US cap gains then so be it, but I don't think Canada's foreign income tax credit will be enough to prevent me from being double taxed.
Peace
You are not allowed to use 1040NR.
I wouldn't be worrying about reducing US tax. The only reason you will have some tax to pay on your gains is because of the reset rules when arriving in Canada. Other than that, even short-term rates are higher in Canada when you include provincial rate. Remember in US you won't be paying Cali tax anymore.
Most US IRA firms won't let you add to your funds after moving to Canada, but even if they do, your IRA won't give you a deduction in Canada. So, this might be a short-term solution for your transition year, but I wouldn't bother with IRA after that.
If the cap gain tax is really bothering you, then hold your investments until they are long-term
What other income will you have? This will affect your taxrate in Canada.
I wouldn't be worrying about reducing US tax. The only reason you will have some tax to pay on your gains is because of the reset rules when arriving in Canada. Other than that, even short-term rates are higher in Canada when you include provincial rate. Remember in US you won't be paying Cali tax anymore.
Most US IRA firms won't let you add to your funds after moving to Canada, but even if they do, your IRA won't give you a deduction in Canada. So, this might be a short-term solution for your transition year, but I wouldn't bother with IRA after that.
If the cap gain tax is really bothering you, then hold your investments until they are long-term
What other income will you have? This will affect your taxrate in Canada.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best