Registered Retirement Savings Plan (“RRSP”)

Many Canadians contribute to RRSPs throughout their lifetime because of the myriad tax savings they receive; tax deductions on gross income coupled with tax deferrals on income earned inside RRSPs make these plans wonderful retirement saving vehicles for Canadians living in Canada. But what about Canadians who move to the US?

While the answer varies from client to client, generally, it is important to keep in mind that RRSPs can provide tax-saving opportunities for Canadians moving to the US. While a Canadian resident withdrawing their RRSP upon retirement in Canada may have to pay tax at the top marginal rate of over 53% to the CRA, US residents can withdraw their RRSPs in a lump sum at a Canadian federal tax rate of 25%. With pre-departure cross-border financial planning in place, our snowbird clients who become US tax residents may be able to reduce this tax to only 15%, providing a significant tax savings.

Another advantage of a US resident paying tax to the CRA on an RRSP withdrawal is that tax paid to Canada generates foreign tax credits in the US. These credits create additional cross-border tax planning opportunities.