John Richardson, J.D. – August 13, 2026
Introduction and purpose
This is the third of a series of posts to help you understand Canadian citizenship by descent. Canada’s Bill C-3 which took effect on December 15, 2025 made major changes to Canada’s citizenship laws. By changing it’s “citizenship by descent” rules, Canada has created an opportunity for many U.S. citizens to be formally recognized as Canadian citizens. This series of posts has been designed to understand Canada’s Bill C-3 (effective December 15, 2025) and understand how and why these changes are so valuable for many U.S. citizens.
A series of posts
The first post focused on Understanding The Citizenship By Descent Provisions Of Bill C-3 – The Canada Citizenship Act. Specifically what factual conditions would result in an indiviudal being a Canadian citizen and therefore entitled to a Certificate of Canadian citizenship? (Note that with the exception of naturalization or direct grant, one would, under Canadian law, be a Canadian citizen from birth. Those born in the United States are U.S. citizens from birth. Hence, many people, recognized as Canadian citizens from birth, would be Canada/U.S. dual citizens from birth.)
Understanding The Citizenship By Descent Provisions Of Bill C-3 – The Canada Citizenship Act
The second post is a discussion of “Canadian Citizenship By Descent – A Search For Proof (To Prove The Truth)”
Canadian Citizenship By Descent – A Search For Proof (To Prove The Truth) – 4 Perspectives
If citizenship cannot be proven, it has no functional or practical existence. Therefore, those seeking a Certificate of Canadian citizenship embark on “a search for proof”. Although the law does not establish a formal deadline to submit the application for a “Certificate of Canadian Citizenship”, I suggest applying as quickly as possible. Laws can and do change!
This third post is to explore why eligibility for a “Certificate of Canadian Citizenshp” matters. What good is it to be a Canadian citizen? What role could Canadian citizenship play in your life. So, you are a Canadian citizen? What do you do with it? How can it benefit you and your descendants? I suggest that (particularly as a U.S. citizen) that there are (at least) six ways that having a Canadian passport could enhance your life.
What does it mean to be a Canadian citizen? What does it mean to move to Canada as a Canadian citizen?
This post is organized in the following Parts.
Part A – Taxation is destiny – moving to another country always has tax implications
Part B – If you move to Canada and renounce U.S. citizenship you may be subject to the U.S. “Exit Tax” rules
Part C – A review of who IS a Canadian citizen and entitled to a Certificate of Canadian citizenship”
Part D – I have my certificate of Canadian citizenship – what do I do with it? How do I turn it into a family heirloom? How can I sponsor my spouse?
Part E – Six specific opportunities Canadian citizenship provides to U.S. citizens
Part F – Renouncing U.S. citizenship and having access to the United States as a Canadian citizen
Conclusion
Appendix A – The 877A U.S. Exit Tax Rules
Appendix B – The 877A “dual citizen from birth” exemption to the Exit Tax Rules
Appendix C – The legislative text of the “dual citizen from birth” exemption to “covered expatriate” status
Here we go …
Part A – Taxation is destiny – moving to another country always has tax implications
In the 21st century – a FATCA and CRS world – the most interesting thing about a person is their tax residency.
Where an individual has “tax residency” determines much of their life.
It is becoming more and more common for people to receive the dreaded “FATCA letter” or “CRS letter”.
Canada imposes worldwide taxation based on residency in Canada and NOT based on Canadian citizenship. This means that you can exist as a Canadian citizen living outside of Canada and NOT be subject to Canadian taxation (except of course on Canadian source income). To put it simply:
You might live in Canada and be a tax resident of Canada or you might not live in Canada and avoid being a tax resident of Canada.
Moving to Canada allows you to access all that Canada has to offer. But moving to Canada means becoming a tax resident of Canada. Here is a guide to moving to Canada and becoming a tax resident of Canada. Notably, for capital gains tax purposes, when you become a tax resident of Canada, your “basis” (deemed cost for capital gains tax purposes) will be equal to the fair market value of the asset when you moved to Canada. This presents an opportunity to avoid Canadian capital gains tax on appreciation that occurred prior to your becoming a tax resident of Canada!
If you move to Canada as a U.S. citizen you will also be subject to U.S. worldwide taxation. This is because the U.S. imposes taxation based on citizenship without regard to where you live in the world. Note that the United States does impose more punitive taxation on U.S. citizens who do NOT live in the United States than on U.S. citizens who do live in the United States. In addition, the U.S. tax system denies (through punitive taxation and reporting) U.S. citizens living in Canada the opportunity to invest in opportunities available to Canadian residents who are not U.S. citizens. The United States actively discriminates against its own citizens.
Taxation creates complicated rules on both sides of the border. But, make no mistake about it. The U.S. tax system makes it difficult for U.S. citizens to live outside the United States as tax residents of another country. Because of the “saving clause“, tax treaties actually ensure that Americans abroad are denied most tax benefits provided by their country of residence.
Part B – If you move to Canada and renounce U.S. citizenship you may be subject to the U.S. “Exit Tax” rules
Some U.S. citizens may want to move to Canada and renounce their U.S. citizenship. As a general principle renunciation of U.S. citizenship can subject U.S. citizens to two special tax rules.
The first rule is found in Internal Revenue Code 877A which creates “Exit Tax” rules. In general, the “Exit Tax” rules impose a tax based on renunciation of citizenship. The tax creates a fictitious sale of all one’s assets creating “fictious income”. That “fictitious income” is then subjected to a “real tax”.
The second rule is found in Internal Revenue Code 2801 which creates the “covered gift” rules. Basically, if a U.S. citizen who renounces U.S. citizenship is a “covered expatriate”, any gifts or requests made by that “covered expatriate” to a U.S. person will be taxed to the U.S. person at a rate of 40%.
A summary of the 877A Exit Tax rules is here.
In the Appendixes to this post I will provide some basic links to help you further understand how these rules work. They do NOT apply to everybody, but they might apply to you. Renunciation of U.S. citizenship is ALWAYS an immigration issue and OFTEN a complicated tax issue.
Part C – A review of who IS a Canadian citizen and entitled to a Certificate of Canadian citizenship”
1. If you are born or naturalized in Canada you ARE a Canadian citizen. (A person who naturalizes as a Canadian citizen becomes a Canadian citizen sometime after birth. Naturalization as a Canadian citizen usually takes years and is a proud moment in the lives of those who naturalize as citizens.)
2. If you were born outside of Canada prior to December 15, 2025 to a Canadian citizen parent you ARE a Canadian citizen.
3. If you are born outside of Canada after December 14, 2025 to a Canadian citizen parent, who was born outside of Canada, that parent must have had at least 1095 days of physical presence in Canada prior to your birth.
Note that unless you are a “naturalized Canadian citizen” or a person who was granted Canadian citizenship because of adoption by a Canadian citizen you ARE – under Canadian law – a Canadian citizen from birth! Note how this may be relevant to option 6 below.
For those who prefer a visual blueprint to determine whether you ARE a Canadian citizen see:
Part D – I have my certificate of Canadian citizenship – what do I do with it? How do I turn it into a family heirloom? How can I sponsor my spouse?
What should I do with my new citizenship? What role should it play in my life?
I believe that there are six options. Note that each option (if planned carefully) turns Canadian citizenhip into a family heirloom that can be passed down from generation to generation. Each generation must spend at least 1095 days in Canada prior to the birth of their children. Why not attend university in Canada? Get an education and establish the 1095 days of presence so that your children can have the gift of Canadian citizenship. Canada has many high quality colleges and universities.
As I commented in a recent article in the Boston Globe:
As a Toronto-based lawyer who assists US citizens and green card holders living in Canada, I read this article with great interest. I have always believed that attending university in Canada is a wonderful opportunity for US residents seeking post-secondary options. Leaving aside other considerations, schools like McGill offer excellent opportunities at much lower cost than comparable US schools. There is a second benefit: There are various ways to leverage the student visa into permanent residence in Canada and eventually citizenship. This is a distinct advantage for those who see the value in dual citizenship.
John Richardson
Toronto, Canada
If you are a Canadian citizen you can sponsor your spouse to become a “permanent resident” of Canada
If your spouse is NOT a Canadian citizen, you will be able to sponsor your spouse to become as “permanent resident” of Canada.
Part E – Six specific opportunities Canadian citizenship provides to U.S. citizens
1. Canadian citizenship as “Plan B”:
Simply, get your Certificate of Canadian citizenship and use it as a Plan B.
You may or may not move to Canada. But you should spend at least 1095 days in Canada so that you can pass Canadian citizenship to future children.
2. Retire to Canada:
Canada does NOT have a retirement visa. Citizenship allows you to move to Canada.
As a citizen you can move to and live in Canada. You can live off your pension, U.S. Social Security and other income you may have. You do NOT (in general) need to have Canadian source income or employment. There are a lot of great places to live in Canada. Canada has fresh air, trees and a lot of clean/fresh water.
3. Raise your family and develop your career in Canada:
Move to Canada with your family before retirement. Live as a U.S. citizen in Canada. Note that you will be a tax resident of BOTH Canada and the United States.
Moving to Canada and living as a U.S. citizen in Canada means that you are subject to both U.S. and Canadian tax law and reporting obligations. Individuals in this category are very likely to have Canadian source income and Canadian assets. This is a nightmare for U.S. tax compliance and is why many U.S. citizens are renoucing their U.S. citizenship. Yes, the U.S. imposes full “Taxes, Forms and Penalaties” on U.S. citizens who live outside the United States. It’s call citizenship taxation.
The problem are that U.S. rules that impose direct taxation on non-U.S. source income and reporting on all assets that are “foreign” to the United States.
4. Move to Canada and renounce U.S. citizenship before becoming a “covered expatriate”:
Move to Canada as a U.S. citizen with a new worth of less than 2 million USD and renounce U.S. citizenship before you become a “covered expatriate” (and therefore avoid the 877A Exit Tax and 2801 “Covered Gift” rules).
This will be attractive to many U.S. citizens who simply do NOT want to live in the United States any more. Generally, if your net worth (assets – liabilities) is below 2 million USD you have a good chance of being able to renounce U.S. citizenship and avoid the exit tax and covered gift rules. (Note that this is complex and it’s important to seek legal advice.)
Note that many people engage in “Exit Tax Planning” that results in either taking steps to ensure that the net worth is below 2 million USD. This is beyond the scope of this post.
This means that you will never pay tax on certain capital gains to the United States AND you will never be taxed by Canada and the gains that accrued prior to your becoming a tax resident of Canada. In addition, you preserve your ability to makes and bequests to your U.S. citizen children.
Shockingly, the U.S. expatriation rules mean that U.S. citizens are actually incentivized to renounce U.S. citizenship in order to preserve the ability to make gifts and bequests to their U.S. citizen childen!
To be clear, renunciation of U.S. citizenship is an intentional and important important form of estate planning.
5. Move to Canada and renounce U.S. citizenship while being subject to the 877A Exit Tax:
Move to Canada as a U.S. citizen with a net worth of more than 2 million USD and renounce U.S. citizenship as a “covered expatriate” (and therefore be subject to the 877A “Exit Tax” and 2801 “Covered Gift” rules).
Not everybody subject to the “Exit Tax” rules actually owes an “Exit Tax”. What if the “Exit Tax” rules, as applied to you, resulted in little or no “Exit Tax”? What if you do not have U.S. children or other U.S. citizen heirs? Renunciation (even if a “covered expatriate”) might make sense. Again it’s imiportant to seek legal and tax advice.
Note many people who realize that they are “covered expatriates” engage in “Exit Tax Planning” which includes taking steps to reduce the amount of the Exit Tax paable. (This discussion is beyond the scope of this post.)
6. Use the (possible) “dual citizen from birth exemption to the the Exit Tax:
Move to Canada as a U.S. citizen with a net worth of more than 2 million USD, live in Canada for five years, file U.S. taxes for five years, and then renounce U.S. citizenship arguing that the “dual citizen from birth” exemption to “covered expatriate” status applies. (This is buried in Internal Revenue Code 877A. See Appenndix C below.) Note that IF this is available benefiting from the dual citizen from birth exemption requires:
– being born as a ciizen for both the United States and the second country (Canada)
– being taxed as a resident of the country of second citizenship (Canada)
– not being a U.S. resident (as defined in Internal Revenue Code 7701(b)) for more than ten of the years before renouncing U.S. citizenship; and
– certifying U.S. tax compliance for the five years prior to the year of renunciation.
Being born a “dual citizen” is a necessary but not sufficient condition for the “dual citizen” exemption to 877A to apply. There are numersous requirements and this can be complicated!
Wow! Can a change in Canadian citizenship law allow for certain U.S. citizens to avoid the 877A “Exit Tax”? Time will tell.
Clealy Canadian citizenship from birth provides an important and unanticipated opportunity. Although within the “letter of the Law”, it is difficult to know how the IRS will respond to this inevitable challenge. IRC 877A DOES include a “dual citizen” exemption from the “covered expatriate” status. A 2025 IRS Private Letter Ruling, confirmed that the section 877A(g)(1)(B)(i)(I) “dual citizenship” from birth exemption is available.
The private letter ruling included:
Taxpayer satisfies the requirements of section 877A(g)(1)(B)(i)(I) because Taxpayer possessed citizenship of Country X and the United States at birth and, as of the anticipated expatriation date, continues to be a citizen of Country X and is taxed as a resident of Country X.
If applicable, this would mean that one could renounce U.S. citizenship, regardless of net worth and avoid the IRC 877A Exit Tax and the IRC 2801 “Covered Gift”. Again this is uncertain, complicated and definitely requires competent legal and tax advice.
Part F – Renouncing U.S. citizenship and having access to the United States as a Canadian citizen
Renunciation of U.S. citizenship must take place outside the United States. The reason is that after renunciation, you have no right to enter the United States. You are subject to the general immigration rules. You will be treated in the same way that U.S. immigration law treats citizens of your country of citizenship. Not all nationalties/citizenships are treated the same way for U.S. immigration purposes.
Fortunately, (as it stands now):
1. Canadian citizens may enter the United States without a visa. They are required to show a Canadian passport.
2. Canadian citizens, from an immigration perspective, may stay in the United States for up to 180 days. But, please do not do this because you may trigger U.S. tax residency (which is a huge problem. Generally, if you keep your stays less than 120 days per year you will be safe.)
3. Note also, that the Trump administration appears to be requiring that non-citizens who stay in the USA for more than 30 days register their stay with the government.
Bottom line: Canadian citizens who renounce U.S. citizenship continue to have preferential access to the United States. A NEXUS card, which enhances entry into the United States, is also possible.
Conclusion
On December 15, 2025 Canada gave a great gift to many U.S. citizens. Notice how the “Gift of Canadian citizenship” has opportunties for every stage in life. It can be protected and nurtured as a family heirloom that allows your future descendents to completely escape the U.S. tax and regulatory regime without being subject to Exit Taxes.
Dual citizenship is a great gift! Dual citizenship from birth is an even greater gift!
It’s important to understand have an early understanding of the value of Canadian citizenship and plan accordingly.
“Those who fail to plan, plan to fail!”
John Richardson – Follow me X.com/Expatriationlaw
Appendix A – The 877A Exit Tax
Appendix B – The dual citizen from exemption from “covered expatriate status
Renouncing US citizenship? How the S. 877A "Exit Tax" may apply to your Canadian assets – 25 Parts
The dual citizen exemption from birth has created different categories of U.S. citizens. The different categories have arguably resulted in a taxation based caste system of U.S. citizenship. Those with dual citizenship from birth are the “highest caste” of U.S. citizen.
Taxation Makes U.S. Citizenship A Caste System With Or Without Birthright Citizenship
Appendix C – Text of the 877A “dual citizenship from “covered expatriate” status
(g) Definitions and special rules relating to expatriationFor purposes of this section—
(1) Covered expatriate
(A) In general
The term “covered expatriate” means an expatriate who meets the requirements of subparagraph (A), (B), or (C) of section 877(a)(2).
(B) Exceptions An individual shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2) if—
(i) the individual—
(I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and
(II) has been a resident of the United States (as defined in section 7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs, or
(ii)
(I) the individual’s relinquishment of United States citizenship occurs before such individual attains age 18½, and
(II) the individual has been a resident of the United States (as so defined) for not more than 10 taxable years before the date of relinquishment.
https://www.law.cornell.edu/uscode/text/26/877A
JR Commentary: Although difficult to read (because of the cross referencing to 877) one is eligible for the “dual ciizen exemption from birth” from “covered expatriate” status if the following four conditons are met:
– dual citizen of birth
– continues to be taxed as a resident of the country of dual citizenship
– is compliant with tax obligations under Title 26 (the Internal Revenue Code) for the five years prior to the year of expatriation
– has not been a resident of the United States (as defined under 7701(b) for more than ten of the previous 15 years.
This is not a model of clarity. But, it can be interpreted to mean that if a Canada/U.S. dual citizen from birth moves to Canada, is taxed as a resident of Canada and avoids triggering the substantial presence test for U.S. residence for five years, he is eligible for the exemption.