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Video

Americans in Canada: Investment Basics

August 20, 2015 By Cardinal Point Wealth

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It’s a good idea for Americans living in Canada to understand which kinds of registered investment accounts they can have without having to confront onerous taxes and paperwork.

Two kinds of plans are friendliest for Americans: The Registered Retirement Savings Plan (RRSP) and the Registered Retirement Income Fund (RRIF).

Effectively, U.S. citizens are simply taxed on the distributions from these accounts as they would be in Canada.

On the other hand, Americans should generally avoid Tax Free Savings Accounts (TFSA) and Registered Education Savings Plans (RESP). The IRS considers both to be offshore trusts, and as such, they involve burdensome filing requirements, with significant penalties for non-compliance. What’s more, their accrued earnings are taxable in the United States.

Check out Terry Ritchie’s recent Globe and Mail video segment for more details about U.S. citizens investing in Canada.

Filed Under: Americans Living in Canada, Cross-border Tax Planning, Video Tagged With: Americans living in Canada, Registered Education Savings Plans, Registered Retirement Income Fund, Registered Retirement Savings Plan, Retirement Savings Plan RRSP, rrsp, Tax Free Savings Accounts

Americans Selling Canadian Homes Face Tax Issues

August 13, 2015 By Cardinal Point Wealth

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Canadian citizens are not subject to capital gains tax when they sell their principal residences. Americans selling their homes in Canada, unfortunately, may have to pay the tax.

As Terry Ritchie explains in this Globe and Mail video segment, Americans face the tax whether their home is in the United States or Canada. In most cases, they are entitled to a U$250,000 exemption—U$500,000 if married on the realized capital gains on their Canadian principal residence. However, home prices have appreciated sharply in areas like Toronto and Vancouver, meaning sellers may surpass the exemption amounts and face the 15% long-term gains tax.

What’s more, Americans could face additional taxes depending on the size of their overall world income. They include the 3.8% Obamacare surtax, which kicks in on income over U$125,000 for single or married separate filers or U$250,000 for couples. And if the gain is substantial enough to push their income beyond U$400,000 for single or married separate filers or U$450,000, the long term capital gain rate increases from 15% to 20%.

The IRS relies on home sellers to declare their gains and pay the proper tax. But be aware that Americans living abroad do have to declare assets under the Foreign Account Tax Compliance Act (FATCA). That means IRS auditors could require explanations about the source of certain assets.

 

Filed Under: Americans Living in Canada, Cross-border Tax Planning, Video Tagged With: Americans Selling Canadian Homes, Canadian principal residence, FACTA, Foreign Account Tax Compliance

Does it make financial sense to renounce your U.S. citizenship?

August 5, 2015 By Cardinal Point Wealth

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Americans living in Canada face tax-reporting obligations that can be burdensome—even to the point where one might consider renouncing their citizenship.

Our advice is to take a step back and think it through. As Terry Ritchie explained recently in this Globe and Mail video segment, renouncing one’s citizenship not only involves administrative hurdles, but can be quite expensive in terms of fees and taxes.

Americans must pay a $2,350 fee to the U.S. consulate. In addition, they must certify that they have been compliant through the filing of their IRS tax returns for the past five years. In addition, those who renounce their citizenship may be subject to two levels of income tax.

Those who have a net-worth over $2 million, or who have not filed returns in the previous five years, may face a capital gains “mark-to-market” tax as high as 23.8%. There is a fairly generous exemption that may eliminate some people from the mark-to-market tax. But those with qualified plans such as RRSPs or IRAs will face an immediate 30% tax on those assets.

Finally, bear in mind that you may not be able to change your mind: Provisions in U.S. law may bar those who renounce their citizenship from ever regaining it or being able to physically return to the U.S.

Filed Under: Americans Living in Canada, Articles, Cross-border Tax Planning, Video Tagged With: Americans living in Canada, cross border residence, Cross-border tax planning

Terry Ritchie, U.S. Expatriation and Your Dual Citizen Clients

November 13, 2014 By Cardinal Point Wealth

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In this video, Terry Ritchie speaks with InvestmentExecutive.com’s Rudy Mezzetta about what U.S. citizens living abroad need to know when considering renouncing their U.S. citizenship. Though the numbers of expatriations are reaching historical highs, the process is not an easy one. After filing with the Department of Homeland Security, an individual wishing to renounce citizenship must meet with the consulate. Upon approval, the individual will be issued a CLN: Certificate of Loss of Nationality, from The State Department. This is not a quick process.

In terms of taxes, if you meet one of these rules—a worldwide net worth of $2 million or more, average annual net income tax of more than $150,000 (adjusted for inflation), or have not complied with all U.S. tax responsibilities in each of the five preceding years—you can be defined as a “covered expatriate.” CEs are subject to onerous tax considerations, including a “mark-to-market tax” that takes into account what you would net if you sold all of your assets upon expatriation, and then taxes this amount as a capital gain. Further implications include a tax on qualified assets and tax-deferred investment vehicles.
Finally, Terry reveals the #1 reason that Americans chose not to expatriate: the possibility (based on pending U.S. legislation) of not being allowed to return to the U.S. View the video here.

Filed Under: Articles, Canada-U.S. Financial Planning Articles, Cross-border Tax Planning, FATCA, Video Tagged With: Canada-U.S. financial planning, Cross-border tax planning, FATCA, Renouncing Citizenship, U.S. citizens living abroad

Tax Implications for Americans Living in Canada

June 4, 2013 By Cardinal Point Wealth

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In this video clip, Terry Ritchie updates Rob Carrick on the IRS crackdown on Americans who live and work in Canada but haven’t been filing their annual tax returns. There is serious documentation required by U.S. tax authorities regarding financial holdings. Last September, a new program was introduced for Americans living and working abroad: the Offshore Volunteer Disclosure program. Of the 5 to 7 million Americans who live/work abroad, only 740,000 actually filed a Financial Bank Account Report (FBAR) in 2011.

While only 18 parties have been criminally prosecuted for hiding assets, clearly there is a large percentage that doesn’t know what to do or where to go for advice. Every situation is different, but it’s important to talk to a specialist who understands these issues. Next year, when the IRS imposes the Foreign Account Tax Compliance Act (FATCA), traditional banks in Canada must comply and provide information. Following this, it will be harder to fight reasonable cause. For most Americans working in Canada, there is a Foreigner Income Exclusion imposed on employment income. This, plus the use of foreign tax credits, generally means there are no taxes owed, but the proper documentation must be filed with the IRS to be in compliance.

Filed Under: Cross-border Tax Planning, FATCA, Video Tagged With: Americans living Canada, Cross-border tax planning, FATCA, FBAR, Offshore Voluntary Disclosure Program

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“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.