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.