Investing tips for dual citizens of Canada and the U.S.
If you have a dual Canadian/U.S. citizen citizenship, be prepared to be fully taxed like a U.S. citizen by the American government, regardless of whether you’ve lived there or not. Therefore, to stay on the IRS’s good side, you need to be careful about where you’re holding what type of investments. For instance, TFSA accounts will be taxed and should be avoided. 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.
Key Takeaways:
- The rules affecting U.S. citizens in Canada are complex, and the consequences of non-compliance can be high.
- Most experts agree that dual citizens should not open a TFSA at all, because while Canada and the U.S. have a tax treaty to harmonize the way pensions and retirement accounts are taxed, this does not cover Tax-Free Savings Accounts.
- A U.S. persons living in Canada needs to be careful when investing in non-registered accounts, as income from most Canadian-domiciled mutual funds and ETFs to be Passive Foreign Investment Companies, or PFICs, may be subject to higher taxes.
“More than any other country, the U.S. keeps its expatriates on a short leash. If you’re a U.S. citizen, you’re generally considered a U.S. person for tax purposes.”