Investing tips for dual citizens of Canada and the U.S. - Quadrant (2024)

FAQs

Investing tips for dual citizens of Canada and the U.S. - Quadrant? ›

In general, a good strategy is to hold for Canadian stocks and bonds in an RRSP, with foreign equities with U.S.-listed ETFs being held in a non-registered account to minimize the taxes. It is also wise to seek professional advice.

Yes, U.S./Canada dual citizens file U.S. taxes

A common question we hear is, “do U.S. dual citizens in Canada have to file U.S. taxes?” Yes, if you are a citizen or resident alien of the United States, you have a U.S. tax obligation, even if you're a dual citizen of the U.S. and Canada.

It's best not to invest in a TFSA as a dual citizen or expat as it causes additional complicated tax reporting and increased costs. You aren't limited by PFIC rules when investing in an RRSP as it is recognized by the Canada/US Tax Treaty.

As for the "dual citizenship" aspect of this inquiry, there is no separate application procedure by which one must apply for it. If you're already a citizen of either the U.S. or Canada and become a citizen of the other without taking active steps to renounce your original citizenship, you are a dual citizen.

Being a dual citizen means that a person is considered a citizen/national of two countries at the same time, and is subject to both country's tax laws. Something to remember is that each country has its own laws dictating who qualifies as a citizen.

Will I lose that citizenship if I become a Canadian? Under Canadian law, you can be both a Canadian citizen and a citizen of another country.

Drawbacks of being a dual citizen include the potential for double taxation, the long and expensive process for obtaining dual citizenship, and the fact that you become bound by the laws of two nations.

The major drawbacks of dual nationality are the potential of double taxation and getting bound by the laws of the two countries. Furthermore, becoming a dual US citizen can be a long and expensive process, especially if you don't have an immigration lawyer to guide you.

As a U.S person living in Canada, you are taxed on money earned in Canada. This can be from investment interest or capital gains, employment income, or if you take money out of your IRA or 401(k).

In general, a portion of US Social Security is taxable in Canada for US Residents in Canada and conversely, the US can tax certain social security equivalent payments made by Canada to US residents.

Does the IRS recognize Canadian TFSA? ›

For U.S. tax purposes, U.S. citizens are generally taxed on all of their income, even if derived outside of the U.S. Since the U.S. Internal Revenue Code (IRC) does not respect the tax shelter of the Canadian TFSA, all income earned inside the account is taxable, even if not withdrawn.

Every country decides whom it considers to be a citizen. If more than one country recognizes you as a citizen, you have dual citizenship. You don't apply for dual citizenship, and there is no related certificate. Canadians are allowed to take foreign citizenship while keeping their Canadian citizenship.

U.S. law does not mention dual nationality or require a person to choose one nationality or another. A U.S. citizen may naturalize in a foreign state without any risk to his or her U.S. citizenship.

Most visitors can stay for up to 6 months in Canada. If you're allowed to enter Canada, the border services officer may allow you to stay for less or more than 6 months. If so, they'll put the date you need to leave by in your passport.

While the USA offers better salary packages, Canada has better healthcare, more maternity leaves and other social benefits. Average work hours for Canada is slightly higher than that of the US. The annual leave structure of both countries is similar.

Most U.S. citizens, including dual nationals, must use a U.S. passport to enter and leave the United States. Dual nationals may also be required by the foreign country to use its passport to enter and leave that country. Use of the foreign passport does not endanger U.S. citizenship.

Foreign Tax Credit

Well, if you qualify for the Foreign Tax Credit, the IRS will give you a tax credit equal to at least part of the taxes you paid to a foreign government. In many cases, they will credit you the entire amount you paid in foreign income taxes, removing any possibility of US double taxation.

Do I still need to file a U.S. tax return? Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.

Dual citizens, along with all other "United States persons", must file a Report of Foreign Bank Accounts, also known as an FBAR, if the aggregate value of their foreign financial accounts exceeds $10,000 at any time during the year.

How long can a Canadian citizen live outside of Canada? ›

How long are you welcome to visit another country? A Canadian can stay for up to 182 days per calendar year (without paying U.S. income tax). Visitors can stay for maximum of six months in each 12 months (not a calendar year, but counting backwards 12 months from your date of entry).

If you stay longer than 6 months under the eTA program and your stay has not been extended by Citizenship and Immigration Canada (emergency situations only), you will lose your travel authorization and not be able to use the eTA for future trips.

Can I have a second U.S. Passport? A little-known fact is that Americans are eligible to hold two U.S. passports at the same time, which can be particularly helpful for travelers who frequently travel to places that require visas. "As I work on trying to visit every country, I have to apply for a lot of visas.

The main difference between dual and second citizenship is the presence or absence of a special agreement between countries. It also defines the rights and obligations of the holder of two passports.

U.S. immigration law does not prohibit dual nationality. The U.S. Supreme Court also ruled that people can “have and exercise rights of nationality in two countries.” However, your country of origin may or may not allow dual citizenship.

Therefore, if there are any modifications in the laws, the citizens get enough time to take the required action to remain the citizens of the country. Hence, dual citizenship never expires.

If you sojourned in Canada for 183 days or more (the 183-day rule) in the tax year, do not have significant residential ties with Canada, and are not considered a resident of another country under the terms of a tax treaty between Canada and that country, see Deemed residents of Canada for the rules that apply to you.

Understanding the 183-Day Rule

Generally, this means that if you spent 183 days or more in the country during a given year, you are considered a tax resident for that year. Each nation subject to the 183-day rule has its own criteria for considering someone a tax resident.

Citizens Selling Canadian Property. Sale of Canadian Real Estate: Capital gains realized by a U.S. person on the sale of any Canadian real property interest, regardless if it has been rented, will attract Canadian and US tax. One-half of capital gains are subject to Canadian tax for all investors.

There's No Official Retirement Visa in Canada

Instead, there are a variety of different programs to establish residence in the country. The majority of Americans who retire in Canada are either dual citizens or have a Canadian spouse who can bring them in under the family sponsorship program.

Do US retirees pay taxes in Canada? ›

Taxes: As a US expat in Canada, you'll need to file a US tax return each year and a Canadian tax return if you have Canadian income. However, the US and Canada have a tax treaty to avoid double taxation.

You must have worked and paid Social Security taxes in five of the last 10 years. If you also get a pension from a job where you didn't pay Social Security taxes (e.g., a civil service or teacher's pension), your Social Security benefit might be reduced.

The closest US analogue to the TFSA is the Roth IRA. TFSA assets, however, cannot be transitioned to Roth accounts; rather, the assets need to be liquidated prior to moving south of the border.

America's Roth IRA. Canada's Tax-Free Savings Account (TFSA) is fairly similar to the United States' Roth IRAs. Both of these retirement-focused vehicles are funded with after-tax money (there's no deduction for the contribution), but they do grow tax-free, and withdrawals are not taxed.

Under the intergovernmental agreement, relevant information on accounts held by U.S. residents and U.S. citizens (including U.S. citizens who are residents or citizens of Canada) are reported to the Canada Revenue Agency (CRA).

Is it Worth Moving to the USA from Canada? Yes, absolutely! If you are looking for a better salary, more job opportunities, several tax benefits, affordable housing, and a vibrant lifestyle shifting to the USA from Canada is totally worth it.

If you leave the U.S., we will stop your benefits the month after the sixth calendar month in a row that you are outside the country. You can make visits to the United States for specific periods of time, depending on how long you've been outside, to continue receiving your benefits.

The Canadian passport is currently ranked 6th among global passports, according to the Guide Passport Ranking Index.

With the dawn of 2023, the Canadian foreign buyers ban went into effect, banning non-Canadians from purchasing property, with several exceptions.

Dual citizens can use the benefits and privileges granted by both countries. They have access to two social service systems, can vote in each nation, and may be able to run for governor in either country (if the law permits).

What is the advantage of having dual citizenship? ›

Having a citizen's passport guarantees a right of entry to both countries and eliminates questioning at customs. This is an advantage, especially if you frequent both countries to study, visit family, or conduct business. #3 As a dual citizen, you can now own property in either country.

If you have Social Security credits in both the United States and Canada, you may be eligible for benefits from one or both countries. If you meet all the basic requirements under one country's system, you will get a regular benefit from that country.

401k/IRA Options

If contributions were made by your employer while you were a resident of US, you will be allowed to make a transfer of a lump-sum payment from your 401k. Specifically, you will be able to transfer a 401k to a rollover IRA (employer permitting) and then transfer the IRA to a Canadian RRSP.

Vancouver; Osoyoos, British Columbia; Edmonton, Alberta; and Calgary, Alberta, also have American expatriate colonies. Most of American Canadians prefer to live in the metropolitan areas of Vancouver, Toronto and Montreal.

Drawbacks of being a dual citizen include the potential for double taxation, the long and expensive process for obtaining dual citizenship, and the fact that you become bound by the laws of two nations.

The United States generally considers a person with dual U.S. and foreign citizenship a U.S. citizen for Social Security purposes. This does not apply if you are a U.S. citizen and a citizen of a country the United States has an international social security agreement with. This excludes Canada and Italy.

While the US and Canada have similar income tax rates, the Canadian government has a higher rate than the US. As a result, if you are an American, you may have to pay a higher rate in Canada than in the US.

A Canadian will not lose their citizenship if they take on another nationality or nationalities. If they are naturalized as a citizen, they will retain their original citizenship in addition to their Canadian citizenship, provided that the other country also allows dual citizenship.

Overall, both Canada and the US are fairly expensive to live in. Canada has much higher housing costs but healthcare costs are much more expensive in the US. While US salaries are slightly higher, Canadians have a much easier time making a higher salary with less education.

Dual or multiple citizenship is legal in Canada. However, it may not be legal in the other country or countries where you hold citizenship.

What are the best countries for U.S. citizens to get a second passport? ›

Some of the best countries to get a second passport are Portugal, Spain, and Caribbean countries like Dominica, Grenada, and St. Kitts and Nevis.

The U.S./Canada tax treaty, in summary, alleviates tax issues for U.S. citizens and residents living in Canada and Canadians living in the U.S. Most countries around the globe, including Canada, have some form of income tax that residents are obligated to pay.

The Foreign Earned Income Exclusion (FEIE) is a US tax benefit that allows you to exclude from taxation a certain amount of foreign-earned income over $100,000. The maximum foreign-earned income exclusion for the 2022 tax year is $112,000.

To avoid the double taxation that would result from having the same income taxed in both the source and residence country, Canadian residents are entitled to relief in the form of a credit or exemption.

In order to avoid this double taxation, Canadian tax laws generally allow you to claim a foreign tax credit on your Canadian income tax return for taxes paid to foreign jurisdictions. This includes both foreign withholding tax and any income taxes you pay if you have to file a foreign tax return.

Through FATCA, the IRS receives account numbers, balances, names, addresses, and identification numbers of account holders. Americans with foreign accounts must also submit Form 8938 to the IRS in addition to the largely redundant FBAR form.

Generally, U.S. citizens and resident aliens must report all worldwide income, including income from foreign trusts and foreign bank and securities accounts, such as interest income. To do this you'll need to complete and attach Schedule B (Form 1040) to your tax return.

In actual fact, you can be absent from Canada as long as you want. The Canadian government recognizes that citizens may travel extensively, work or study abroad. You will always maintain your Canadian citizenship. What absentia may affect is your Canadian health care coverage and income tax.

They can be barred from returning to the U.S. for three years, and those who overstay for longer than a year face a 10-year ban. For more information, visit the U.S. Customs and Border Protection website. A criminal record will prevent you from entering the USA or obtaining your USA immigration status.

Most visitors can stay for up to 6 months in Canada. If you're allowed to enter Canada, the border services officer may allow you to stay for less or more than 6 months. If so, they'll put the date you need to leave by in your passport. They might also give you a document.

Can I leave Canada after 6 months and come back? ›

You can leave and come back to Canada multiple times as long as your visitor visa has not expired.

The answer is you can have as many as you want, depending on your original citizenship. While some countries allow dual citizenship or many citizenships at the same time, others do not and require you to renounce your previous citizenship.

As a U.S. citizen working and living in Canada, yes, you may also have to file Canadian taxes: Canadian tax residents are taxed on all income, regardless of where it's earned.

Residency status and tax obligations

In Canada, your income tax obligations are based on your residency status, not your citizenship or immigration status.

Federal law requires U.S. citizens and resident aliens to report their worldwide income, including income from foreign trusts and foreign bank and other financial accounts.

If you are a Canadian individual or a company that provides services to American customers or engages in trade or business within the United States, you may be required to file a tax return with the Internal Revenue Service (IRS), even if you filed your tax return with the Canada Revenue Agency (CRA).

If you have Social Security credits in both the United States and Canada, you may be eligible for benefits from one or both countries. If you meet all the basic requirements under one country's system, you will get a regular benefit from that country.

If you are a non‑resident who owns real property in Canada, you must follow a strict tax process if you are looking to sell. This process involves applying for a Certificate of Compliance related to the disposition of taxable Canadian property using form T2062. In simple terms, this is a withholding tax.

Your provincial or territorial health plan will cover only part, if any, of medical expenses outside Canada and will not pay up front. Furthermore, it will become invalid if you live elsewhere beyond a certain length of time – generally six to eight months, depending on your province or territory.

How long can you stay out of Canada if you are a permanent resident? ›

The 5-year period is assessed on a rolling basis. Immigration, Refugees and Citizenship Canada (IRCC) will look back at your time in Canada over the previous 5 years. This means that you can spend a total of up to 3 years outside of Canada during a 5-year period.