Cardinal Point Wealth Management

Your Cross-Border Financial Advisor

Contact Us | Client Login
  • About Us
    • Our Story
    • Our Team
    • Our Clients
    • Legal and Compliance
    • Part 3 Form CRS
    • Relationship Disclosure Information
  • What We Do
    • Investment Management
    • Wealth Planning
    • Tax Planning and Preparation
    • Private Wealth Services-U.S.
    • Private Wealth Services-Canada
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
  • Cross-Border Services
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • U.S. citizens living in Canada
    • Moving to Canada from the U.S.
    • Canadians Living in the U.S.
    • Moving to the U.S. from Canada
    • Expatriates Living Abroad
  • Blog
  • About Us
    • Our Story
    • Our Team
    • Our Clients
    • Legal and Compliance
    • Part 3 Form CRS
    • Relationship Disclosure Information
  • What We Do
    • Investment Management
    • Wealth Planning
    • Tax Planning and Preparation
    • Private Wealth Services-U.S.
    • Private Wealth Services-Canada
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
  • Cross-Border Services
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • U.S. citizens living in Canada
    • Moving to Canada from the U.S.
    • Canadians Living in the U.S.
    • Moving to the U.S. from Canada
    • Expatriates Living Abroad
  • Blog

Do You Have to Pay U.S. Taxes for Canadian Registered Retirement Savings Plan Withdrawals?

February 22, 2014 By Cardinal Point Wealth

Have you recently moved to the United States from Canada and left your Registered Retirement Savings Plan (RRSP) open? After becoming a U.S. resident, you might be wondering if you have to pay U.S. taxes on withdrawals from your Canadian retirement plan.

There is a good chance that Canadians, who moved to the U.S., have a keen understanding about the Canadian tax implications regarding cashing out their RRSP. However, often Canadian expats lack proper perspective on the U.S. tax implications in their unique situation.

From the perspective of Canadian tax laws, once someone becomes a non-resident of Canada, further withdrawals from the RRSP are exposed to a 25 percent withholding tax by the Canadian Revenue Agency (CRA). If you are under the age of 71, you have the option to convert the RRSP into a Registered Retirement Income Fund (RRIF) that will allow the withholding tax to be reduced to 15 percent. Under the RRIF provisions, no further contributions can be made once conversion of the RRSP to an RRIF has occurred; however, the conversion enables the plan holder to make periodic withdrawals.

Canadians, who choose to become a resident of the U.S., may still be liable to pay U.S. taxes on their withdrawals from the RRSP or RRIF. However, there are a few workarounds to mitigate the U.S. taxes on Canadian RRSP withdrawals.

Knowing how to properly invoke the Canada-U.S. tax treaty is step one in reducing the likelihood of double taxation. The most common way to reduce your U.S. tax exposure would be to take a foreign tax credit for the tax withheld by the Canada Revenue Agency on the withdrawals from the RRSP. Moreover, you may be allowed to withdraw the cost base of your RRSP tax-free. Nonetheless, the amounts transferred from Canada to the U.S are subjected to some special rules, after considering the foreign exchange adjustments.

Since these RRSP transactions are often complicated and subjected to both countries’ tax regimes, seeking professional help to reduce tax burdens is always a good choice. At Cardinal Point, we are always here to help you navigate the complicated tax laws when it comes to withdrawing funds from your Canadian RRSP. Our experts can guide you in establishing your RRSP’s cost base under the U.S. tax law and help you make good decisions about whether to take a tax credit or deduction for the taxes already paid to the Canadian Revenue Agency. Contact us today.

Terry Ritchie is the Director of Cross-Border Wealth Services at the Cardinal Point, a cross-border wealth management organization with offices in the United States and Canada.  Terry has been providing Canada-U.S. cross-border financial, investment, tax, transition, and estate planning services to affluent families for over 25 years.  He is active as an author, speaker and educator on international tax and financial planning matters. www.cardinalpointwealth.com

Filed Under: Articles, Canada-U.S. Financial Planning Articles, Cross-border Tax Planning, Featured, Investment Management Articles Tagged With: Canada-U.S. financial planning, Cross-border tax planning, Investment Management, U.S. Resident with RRSP

Articles You Might Like

fiduciary standard

Fiduciary Standard or a Pretender

CA US 401k/RRSP deductibility

Ebook: Canadian Deductibility of 401(K) Contributions and U.S. Deductibility of RRSP Contributions

Ramifications of Liquidating Brokerage Account

Residents of Canada: What are the Canadian and U.S. Tax Ramifications when being forced to liquidate a U.S. brokerage account Ebook

Discuss your goals with us today
Canada US Investment Management Goals
We can handle all of your Canada-U.S. investment management, tax, estate and financial planning complications
Wealth management strategies fit for you
Cross-Border Financial Management assessment
Our cross-border financial planning team can provide an assessment of your needs based on your unique circumstances

How We Help

  • Cross-Border Financial & Tax Planning
  • Americans Living in Canada
  • Canadians Living in the U.S.
  • Moving to Canada from the U.S.
  • Moving to the U.S. from Canada
  • Expatriates Living Abroad

What We Do

  • Investment Management
  • Wealth Planning
  • Tax Planning & Preparation
  • Private Wealth Services for U.S. Residents
  • Private Wealth Services for Canadian Residents
  • Cross-Border Financial & Tax Planning

Resources

  • Canadians in California
  • Canadians in Texas
  • Canadians in Florida
  • Canadians in Arizona
  • Canadian and U.S. Expat Tax Planning
  • Wealth Management for U.S. Citizens in Canada
  • Custodian Closed Your Cross-Border Investment Account?

Videos & Social Media

  • Americans in Canada: Investment Basics
  • Americans Selling Canadian Homes Face Tax Issues
  • Does it make financial sense to renounce your U.S. citizenship?
    BrightScope Cardinal Point Twitter Cardinal Point Google Plus Cardinal Point Facebook Cardinal Point LinkedIn Cardinal Point
Copyright © 2023 Cardinal Point Capital Management, ULC. All Rights Reserved.

“Cardinal Point” is the brand under which dedicated professionals within Cardinal Point Capital Management, ULC provide financial, tax and investment advisory, risk management, financial planning and tax services to selected clients. Cardinal Point Capital Management, ULC is a US registered investment advisor and a registered portfolio manager in Canada (ON, QC, MB, SK, NS, NB, AB, BC). Advisory services are only offered to clients or prospective clients where Cardinal Point and its representatives are properly registered or exempt from registration. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.