Relocating from Canada to the United States involves a complex web of financial and tax considerations. To ensure a smooth transition and maintain financial stability, it’s essential to understand the implications of such a move and plan accordingly. This comprehensive guide delves into the critical aspects of financial and tax planning for Canadians moving to the U.S., including various immigration pathways.
Immigration Pathways from Canada to the U.S.
Before addressing financial and tax planning, it’s crucial to understand the immigration options available for Canadians:
- Family Sponsorship: If you have immediate family members who are U.S. citizens or permanent residents, they can sponsor you for a Green Card.
- Employment-Based Visas:
- TN Visa: Under the United States-Mexico-Canada Agreement (USMCA), Canadian professionals in specific occupations can obtain a TN visa to work in the U.S.
- H-1B Visa: For specialized occupations, subject to annual caps and more stringent requirements.
- L-1 Visa: For intra-company transferees who work in managerial positions or have specialized knowledge.
- Investment-Based Visas:
- E-2 Visa: For investors who commit substantial capital to a U.S. business but have the intent to depart the U.S. once their E-2 visa status ends – essentially a non-immigrant visa in nature
- EB-5 Visa: Requires a more significant investment in a U.S. enterprise and the creation of jobs for U.S. workers, with the option to become a lawful permanent resident in the U.S. if certain conditions are met
- Student Visas: F-1 visas allow Canadians to study in the U.S., with potential pathways to work authorization post-graduation.
Key Consideration: Each visa category has specific requirements, benefits, and limitations. Consulting with a Cardinal Point cross-border financial advisor and an immigration attorney can help determine the most suitable pathway based on your circumstances.
Tax Residency and Departure Tax
Determining Tax Residency
Upon moving to the U.S., it’s essential to establish your tax residency status:
- Canada: Canada taxes individuals based on residency. Departing Canada may trigger a “departure tax,” which is a deemed disposition of your worldwide assets, potentially resulting in capital gains tax liabilities. Many tax and financial planning items can be completed before you leave Canadian tax residency to reduce or eliminate this departure tax, and properly structure your assets while in the U.S.
Understanding the Deemed Departure Tax in Canada
- United States: The U.S. taxes are based on immigration and residency status. As a Canadian moving to the U.S., you’ll become subject to U.S. tax laws and may need to file U.S. tax returns.
Key Consideration: Properly severing Canadian tax residency is crucial to avoid ongoing Canadian tax obligations. This involves cutting significant residential ties, such as selling your Canadian real estate and moving your property to the U.S. Consult with a Cardinal Point cross-border tax advisor to discuss your specific situation.
Cross-Border Investment Management – Coordinated Approach to Investments
Managing investments across borders necessitates an understanding of both U.S. and Canadian regulations to ensure tax efficiency and compliance. Unfortunately, most Canadian investment advisors are not registered and licensed to provide investment advice to a resident of the U.S. nor do they have the experience overseeing the investment needs of U.S. residents. Partnering with a Canada-U.S. dually registered and licensed Cardinal Point cross-border financial advisor that can oversee investment accounts domiciled in both Canada and the U.S. ensures all cross-border assets are managed in a coordinated and integrated fashion.
Managing Retirement Accounts
Registered Retirement Savings Plan (RRSP) & Locked-In Retirement Accounts (LIRA)
Your RRSP or LIRA can remain in Canada, and you can continue to defer Canadian and U.S. taxes on its growth. The Canada-U.S. Tax Treaty allows for this deferral, but not all States abide by the Treaty. It’s also essential to understand the tax implications of withdrawals, as they will be taxed in both countries, with potential foreign tax credits available to mitigate double taxation.
Securing Your Financial Future Across Borders: Navigating RRSPs/RRIFs/LIRAs/LIFs – An eBook Guide for Tax Planning for Canadians Moving to the U.S.
Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP) and First Home Savings Account (FHSA)
The TFSA, RESP and FHSA are not recognized as tax-exempt accounts in the U.S.:
- Income and gains within a TFSA, RESP and FHSA are taxable under U.S. law.
- Consider closing the TFSA before moving to avoid complex reporting requirements and potential taxation.
- Consider rolling the FHSA into your RRSP before moving to avoid complex reporting requirements and potential taxation.
- Consider closing the RESP before moving or transfer the plan’s subscriber to a family member who is a Canadian resident and citizen. See our blog: Cross Border Wealth Management: Navigating your RESP
Key Consideration: Consult with a Cardinal Point cross-border tax advisor to develop a strategy for managing Canadian retirement accounts post-move.
Investment and Financial Accounts
Non-Registered Investment Accounts
Unrealized capital gains accrued before your move are subject to the Canadian departure tax, while gains after becoming a U.S. resident are taxed by the U.S. Obtain valuations of your investments as of your move date to distinguish between Canadian and U.S. tax obligations as well as to assist in quantifying your Canadian “exit” tax exposure Work with Cardinal Point on strategies to mitigate this “exit” tax.
Moving from Canada to the U.S.: What to do with your Canadian dollar investments
Currency Considerations
Fluctuations between the Canadian dollar (CAD) and U.S. dollar (USD) can impact your finances. Consider converting CAD to USD when favorable or maintaining dual-currency accounts to manage exchange rate risk.
Key Consideration: A Cardinal Point cross-border financial advisor experienced in cross-border transitions can help optimize your investment strategy and currency management.
Real Estate Holdings
Primary Residence
Selling your Canadian primary residence before moving can exempt you from capital gains tax under the principal residence exemption.
Rental Properties
If retaining Canadian rental properties:
- Report rental income to both Canadian and U.S. tax authorities. For specifics regarding non-resident withholding on Canadian sourced rental income, check out our blog: Understanding the Tax Implications of Leaving Canada.
- Be aware of specific withholding tax and compliance requirements in Canada and claim foreign tax credits in the U.S. to prevent double taxation.
Key Consideration: Work with a Cardinal Point cross-border tax advisor to evaluate the financial benefits of keeping versus selling Canadian real estate, considering tax implications and market conditions.
Estate Planning
Wills and Trusts
Review and possibly update your estate planning documents to ensure they are valid under U.S. law and still reflect your current wishes. Also, review beneficiary designations on investment accounts, retirement plans, and insurance policies to comply with U.S. inheritance rules.
Estate Taxes
The U.S. imposes estate taxes on worldwide assets for its residents above $13.99 million USD (for 2025). Understand the current estate tax exemption limits and plan accordingly to minimize potential liabilities. Canadians moving to the U.S. should carefully structure their cross-border estate to minimize exposure.
Key Consideration: Engage with a Cardinal Point cross-border financial advisor and an estate planning attorney familiar with cross-border issues to develop a comprehensive plan.
Health Care Considerations
Unlike Canada’s publicly funded healthcare system, the U.S. operates largely on private health insurance, often provided through employers. Health insurance should be prioritized if you’re moving from Canada to the U.S.
- Employer-Sponsored Health Plans: If you’re moving for a job, your employer may provide a health plan. Be sure to review coverage details, including deductibles and out-of-pocket costs.
- Marketplace/Private Insurance: If you’re self-employed or don’t have employer coverage, explore Affordable Care Act (ACA) plans via the Health Insurance Marketplace or private insurers.
- Medicare: If you are 65 or older and have lived in the U.S. long enough to qualify, you may be eligible for Medicare. However, if you’re newly arriving in the U.S., you may need private insurance coverage to bridge you until you are eligible for Medicare.
Key Consideration: Unlike Canada, where health care is funded through taxes, in the U.S., you must pay for private insurance or employer-sponsored plans. Work with a Cardinal Point cross-border financial advisor to factor this into your financial planning when estimating your cost of living.
Cross-Border Tax Compliance and Reporting Obligations
Moving to the U.S. does not eliminate all Canadian tax filing obligations. You must ensure compliance with tax laws in both countries.
Canadian Tax Filing Requirements Post-Move
- If you have Canadian assets, such as rental properties, investments, or business interests, you may still have tax obligations in Canada.
- Departure Tax: When leaving Canada, you may be subject to deemed disposition on certain capital assets, triggering capital gains tax.
- If you receive income from Canada post-move, such as rental income, dividends, or pensions, you must file a Canadian non-resident tax return (T1135 for foreign asset reporting).
U.S. Tax Reporting Requirements
As a U.S. tax resident, you will be taxed on your worldwide income and must file annual IRS tax returns. This includes:
- Form 1040 (U.S. individual income tax return).
- FBAR (Foreign Bank Account Report) if your Canadian (or other non-U.S.) financial accounts exceed $10,000 USD at any time in the year.
- FATCA (Form 8938) if your foreign (non-U.S.) financial assets exceed $100,000 USD at year-end (or $150,000 at any point during the year, for married individuals filing jointly).
Note: Unlike Canada where most provincial tax is filed in concert with CRA tax filing, U.S. States require a separate State income tax return. Some States (like California) do not honor the Canada-U.S. Tax Treaty), therefore proactive planning is a necessity.
Key Consideration: The Canada-U.S. Tax Treaty prevents double taxation through foreign tax credits. However, tax treaty benefits must be applied correctly, so working with a Cardinal Point cross-border tax advisor is highly recommended.
Retirement Accounts and Social Security Considerations
Canada Pension Plan (CPP) and Old Age Security (OAS)
If you have contributed to the Canada Pension Plan (CPP) or qualify for Old Age Security (OAS), you may still be eligible to receive benefits while living in the U.S.
- CPP Benefits: The U.S.-Canada Totalization Agreement ensures that Canadian workers who relocate to the U.S. can still qualify for CPP benefits, even if they haven’t contributed for the full eligibility period.
- OAS Clawback: As a U.S. resident, there is no OAS clawback reducing or eliminating your OAS benefits due to income thresholds.
Key Consideration: U.S. residents receiving CPP or OAS must report it on their U.S. tax return, but a tax treaty reduces or eliminates double taxation. Discuss with a Cardinal Point cross-border tax advisor to factor in your entitlements to CPP and OAS in your long-term planning.
U.S. Social Security Benefits
- If you have worked in the U.S. and contributed to Social Security, you may qualify for U.S. Social Security benefits.
- The U.S.-Canada Totalization Agreement allows for combined work credits between CPP and Social Security to qualify for retirement benefits.
Key Consideration: Work with a Cardinal Point cross-border financial advisor to determine how your Canadian and U.S. benefits interact to optimize your retirement income.
Summary: Key Steps for Canadians Moving to the U.S.
- Determine Your U.S. Visa Status: Secure a visa, such as a TN, H-1B, or Green Card.
- Plan for Canadian Departure Tax: Assess capital gains tax obligations before leaving Canada inclusive of tax strategies to mitigate potential exposure.
- Cut Canadian Tax Residency: Close Canadian accounts, sell property, and document your move. This is not an exhaustive list. Make sure you speak with a Cardinal Point cross-border financial advisor.
- Optimize Retirement Accounts: Understand how RRSPs/LIRAs, TFSAs, and FHSAs are treated from a cross-border tax perspective.
- Secure U.S. Health Insurance: Research employer-sponsored, private, or ACA options.
- Manage Cross-Border Investments: Consider tax-efficient strategies before transitioning accounts.
- Comply with U.S. and Canadian Tax Rules: Stay current on tax filings, FBAR, and FATCA requirements.
- Review Estate Planning: Ensure wills, trusts, and beneficiary designations align with U.S. laws.
Moving from Canada to the U.S. requires careful investment, tax, financial, and legal planning performed in a coordinated fashion. Work with cross-border financial advisors to optimize tax efficiency, protect wealth, and avoid unnecessary penalties. Cardinal Point Wealth Management specializes in helping individuals navigate the complexities of cross-border financial planning. Learn More