Canadian professional athletes already living in the US or those moving to the US may have an RCA. RCAs are common retirement plans for high-income earners in Canada, such as athletes. These plans allow athletes and their employers (the professional sports organizations for which they play) to make contributions to a trust, which is run by a custodian. Athletes can withdraw funds from the plan to fund retirement, as a supplement to RRSPs, for example.
Canadian athletes with RCAs who move to the US may be concerned that they are at a disadvantage with respect to withdrawing funds due to their US-resident taxpayer status. However, we specialize in helping athletes withdraw RCA funds at a low tax rate as US residents.
Similarly, 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 clients may be able to reduce this tax to only 15%, providing a significant tax savings. This is good news for Canadian professional athletes who move to the US and have contributed to RRSPs prior to their departure south of the border.
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.