Tag Archives: TFSA

To TFSA Or To Not TFSA, Whether Tis Better For A US Citizen Living In Canada To Open A TFSA Or Not

Update March 29, 2023 …

On March 28, 2023 the Government of Canada officially announced that the Canadian “First Home Saving Account” will be available to Canadian residents as of April 1, 2023. As explained in this description of the “FHSA”, this will be of value to U.S. citizens who are resident in Canada. The circumstances surrounding the TFSA are similar to the FHSA. Here is a more complete discussion of US citizens residing in Canada and the use of the FHSA.

Introduction And Purpose

As the article referenced in the above tweet makes clear, a very small percentage of Canadians can expect their retirements to be funded by pensions. The message is that individuals have an obligation to themselves and to their families to engage in responsible financial and retirement planning. Governments have a clear, important and sustainable interest in assisting their residents to achieve and maintain financial stability. The tax laws in every country have provisions in their tax codes to both incentivize and facilitate this planning. They facilitate planning planning vehicles through provisions in their tax codes. Almost all of these planning vehicles are based on “before tax” advantaged vehicles (RRSP or Conventional IRA) or “after tax” vehicles (TFSA or ROTH IRA) which allow for tax free growth. Canada is home to many people who are dual Canada/US citizens. Canadian residents who are also U.S. citizens are subject to the U.S. tax code. This means that they are required to comply with the tax codes of both Canada and the United States (two of the most complex tax regimes in the world). But, what happens when the financial planning provisions in Canada’s tax law are not recognized in the tax code of the United States? What Canada giveth, the U.S. (possibly) taxeth.

The purpose of this post is to take a “deeper dive” into the mechanics financial planning and investing for U.S. citizens who reside in Canada. Most U.S. citizens feel completely disabled by U.S. tax laws. I don’t believe that this is necessarily true in all cases. This is intended to be one of a series of posts to address the specific issue of:

“Retirement And Financial Planning For U.S. Citizens Living Outside The United States”

If you have an idea for a topic send me an email. I encourage you to subscribe to this blog.

U.S. Citizens In Canada And The TFSA

I am frequently asked by Canadian residents who are US citizens whether they should open a TFSA (“Tax Free Savings Account”) in Canada. The purpose of this post is to discuss this very issue. As usual there is no “one size fits all answer” that is correct for everybody. In order to analyze this question I am joined by Oliver Wagner of “1040 Abroad” who has provided his thoughts, experience, commentary and some sample tax US tax returns which illustrate the various principles.

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Tax me now! Tax me later! Tax me never! Interview with expat financial planner Jimmy Miller

Prologue: In search of a tax haven …

Where to find that tax haven – let’s start with a ROTH IRA

The above tweet from CPA Gary Garter leads to a discussion that includes:

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The Competent Authorities Should Agree That the Canadian TFSA Has The Same Treaty Status As The US Roth IRA

2018 Prologue

In 2018 I wrote a post arguing that it is reasonable to conclude that the text of the Canada US Tax Treaty should be interpreted to mean that a Canadian TFSA is – like a US ROTH IRA – a pension within the meaning of the Canada US Tax Treaty. The 2018 post was arguing for equal treatment without the intervention of the respective Canadian and American Competent Authorities.

The Punitive Taxation Of US Citizens Living Outside The United States Continues

I have previously and repeatedly made the point that:

The United States imposes a separate and more punitive system of taxation on US citizens living outside the United States than on US citizens living in the United States.

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Canada U.S. Tax Treaty: Why the 5th protocol of the Canada US Tax Treaty Clarifies that the TFSA is a pension within the meaning of the Canada U.S. Tax Treaty

Article XVIII of the Canada U.S. Tax Treaty Continued – The question of the TFSA

In a previous post I discussed how a U.S. citizen moving to Canada with an existing ROTH will be treated under the Canada U.S. Tax treaty.

The purpose of this post is two-fold:

First, to argue that the the TFSA should be treated as a “pension” within the meaning of Article XVIII of the Canada U.S. Tax Treaty; and

Second, to argue that the 5th protocol (which clarifies that the ROTH IRA) is a pension within the meaning of the Canada U.S. Tax Treaty means that the Canadian TFSA has the same status.

This will be developed in three parts:

Part A – How the Canada U.S. Tax Treaty affects U.S. Taxation of the Canadian TFSA

Part B- Wait just a minute! I heard that the “Savings Clause” means that the treaty would not apply to U.S. citizens?

Part C – The TFSA and Information Returns: To file Form 3520 and 3520A or to not, that is the question

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