US citizens living in Canada number in the millions.
While the benefits of living in Canada are plentiful, if you are a US citizen living in Canada, you are subject to taxation by both the IRS and the CRA, a situation that can lead to double taxation (being taxed on the same income twice) as well as other costly tax traps.
Indeed, some investment and estate planning vehicles work well for Canadian citizens from a tax-savings perspective, but not for US citizens who live in Canada.
Examples of these traps can be as straightforward as owning Canadian mutual funds and ETFs, which may be considered Passive Foreign Investment Companies (“PFICs”) by the IRS; PFICS are punitively taxed by the IRS and are therefore not ideal investment vehicles for U.S. citizens living in Canada. TFSAs pose similar problems, as the IRS does not defer tax on income earned inside such accounts. Moreover, the IRS may view TFSAs as foreign trusts, which leads to reporting obligations and potential tax penalties.
Risk of exposure to double taxation and other punitive tax treatment also exists if a US citizen is a shareholder in Canadian corporations or trusts that are classified by the IRS as Controlled Foreign Corporations or PFICs.
Because of such complexities on both sides of the border, US citizens in Canada often find that they are unable to make financial decisions; before making substantial financial decisions, US persons living in Canada must carefully consider a wide variety of multifaceted matters spanning from tax filing requirements and tax planning to investment and retirement planning, a challenging task.
We work with US citizens living in Canada by analyzing your complete financial picture and offering tax-advantageous planning solutions in order to protect and effectively grow your net worth in Canada while mitigating the tax consequences of being a US citizen.
Typically, we work with clients to create customized cross border financial plans that offer optimal planning solutions. We also develop implementation plans that serve as roadmaps for effectively executing our suggestions.
If you think we may be of service to you, the first step is to request a consultation with our team of professionals.