Advice on TFSA & RRSP before moving to US

[greentea123 0]

Hi everyone! I've been undergoing the CR1 visa process for the past year. I had my interview on November 20th at the US Consulate in Montreal and received my passport with the visa in it at the end of November. As I prepare and plan for my POE next week, I'm tying up loose ends in Canada - including my finances.

 

My main question is related to my TFSA and RRSP: what are some recommendations for maintaining or collapsing if the total value is less than $15,000 CAD? Should I leave them as is, or should I withdraw/collapse both and leave them in a Savings account? I'd prefer to keep Canadian funds in Canada.

 

Also, do I need to inform the CRA about changing my residency before I leave? Or after?

 

Any advice on navigating these topics would be appreciated!

 

Cheers!

[jle2234 68]

Hi @greentea123,

 

I can't say for certain, as I'm not a finance professional, but I can tell you what I did.

 

1. I did not have any RRSPs but did have a private pension through HOOPP, the total of which was $10,000-$15,000. I cashed it out, used a portion to pay for moving expenses, and invested the rest.

 

2. I maintained my TFSA.

 

3. I also maintained one Canadian credit card. I try to use it at least once per month, even if just for a small purchase, and pay it off in full each month. I do this for two reasons, 1) it's nice to have a completely empty credit card in case of emergencies, and 2) it keeps my Canadian credit history active in the event that we move back. Note that U.S. and Canadian credit histories are not transferrable, so living in the U.S. will appear as a significant gap in your credit history in Canada if you do not keep some form of credit active.

 

4. For the CRA, I made my parents' Canadian address my permanent address, and intend to check the 'My residency status changed last year' box on my upcoming taxes.

[TS_123 9]

On 12/18/2017 at 7:05 PM, greentea123 said:

Hi everyone! I've been undergoing the CR1 visa process for the past year. I had my interview on November 20th at the US Consulate in Montreal and received my passport with the visa in it at the end of November. As I prepare and plan for my POE next week, I'm tying up loose ends in Canada - including my finances.

 

My main question is related to my TFSA and RRSP: what are some recommendations for maintaining or collapsing if the total value is less than $15,000 CAD? Should I leave them as is, or should I withdraw/collapse both and leave them in a Savings account? I'd prefer to keep Canadian funds in Canada.

 

Also, do I need to inform the CRA about changing my residency before I leave? Or after?

 

Any advice on navigating these topics would be appreciated!

 

Cheers!

I actually paid good money to speak with a Tax accountant in Toronto to discuss this very topic.

 

If you move to the US and cut all ties with Canada then you will have to pay a departure tax (your situation may vary if you do in fact have to pay).  Myself for example, I had converted large sums of money from CAD to USD over the past several years at an exchange rate above the current exchange rate.  If I cut all ties to Canada then I will have to pay a departure tax based on the income I received from the time I purchased USD to the current exchange rate at time of departure.

 

As far as TFSA are concerned, they are NOT one of the vehicles that are exempt in the US, meaning you will have to pay capital gains tax every year I believe on your TFSA.  Before I depart, I will be rolling my TFSA brokerage account and make a contribution to my RRSP brokerage account.  

 

RRSP's have a decent advantage if you move to the US.  If you do a gradual withdrawl over x number of years, you will only have to pay 15% CAD tax and that too, can be used a foreign tax credit for your US taxes.

 

Prior to moving to the US however, it's important to crystalize your RRSP's shortly before you move and repurchased the RRSP's so as your gain as minimum.

 

Best to speak with a Tax specialist that specifically files for Canadians living in the US.

[NikLR 13,220]

I used my Canadian credit to obtain a US credit card.  

[legendqueue 163]

On 12/22/2017 at 6:59 PM, TS_123 said:

If you move to the US and cut all ties with Canada then you will have to pay a departure tax (your situation may vary if you do in fact have to pay).  Myself for example, I had converted large sums of money from CAD to USD over the past several years at an exchange rate above the current exchange rate.  If I cut all ties to Canada then I will have to pay a departure tax based on the income I received from the time I purchased USD to the current exchange rate at time of departure.

Can you elaborate on this?  From what I've read (e.g. http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/giving-canadian-residence/) departure tax doesn't apply to cash deposits, so why do you need to pay departure tax on cash?  

[journadian 13]

On 2017-12-19 at 11:11 AM, jle2234 said:

 

3. I also maintained one Canadian credit card. I try to use it at least once per month, even if just for a small purchase, and pay it off in full each month. I do this for two reasons, 1) it's nice to have a completely empty credit card in case of emergencies, and 2) it keeps my Canadian credit history active in the event that we move back. Note that U.S. and Canadian credit histories are not transferrable, so living in the U.S. will appear as a significant gap in your credit history in Canada if you do not keep some form of credit active.

 

I had the impression that non residents weren’t allowed to keep Canadian credit cards.  There’s a lot of different rumours I’m not sure what is true.  The less I know the better  Cutting it out is a means of cutting ties and it’s important to distinguish what your resident status is come taxtime.

 

 

On 2017-12-22 at 9:59 PM, TS_123 said:

 

As far as TFSA are concerned, they are NOT one of the vehicles that are exempt in the US, meaning you will have to pay capital gains tax every year I believe on your TFSA.  Before I depart, I will be rolling my TFSA brokerage account and make a contribution to my RRSP brokerage account.  

 

I just sold my tfsa this year.  Can’t wait to fill out those crazy forms   (last year was the first time I had to do the American taxes, the forms that needed to be filled for foreign assets was a big surprise.)

 

 

@greentea123

Also to note my tfsa was from Bmo and once I informed them I was a non res they had to stop Investorline services on my account and limiting to sell only.  (This happened about a year after living in the USA.  I was naive..) My tfsa were stock options so there was another choice of converting them to certificates( not sure?) or moving them to a brokerage that can deal with can/us.  Talk to your bank/financial institution about non-resident account holders.

I’m not an accountant or expert but having to deal with those taxes was a nightmare for me.  If you decided to close the tfsa do it before the new year, while you are still canadian lol.  

 

And inform the cra to stop gst cheques. Good luck

[TS_123 9]

On 12/28/2017 at 6:01 PM, legendqueue said:

Can you elaborate on this?  From what I've read (e.g. http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/giving-canadian-residence/) departure tax doesn't apply to cash deposits, so why do you need to pay departure tax on cash?  

If you kept your currency in CAD then you do not. If you converted some money to USD and the ex rate at the date you depart is lower, you have realized a capital gain hence you will pay a departure tax on it. 

[acidrain 325]

I wound up cashing out all our TFSA's and RRSP's as they are a pain to declare on US taxes. My income was low enough where the tax implications in Canada were not significant. The banks didn't hassle me for cashing them either.

I read you are supposed to contact any agencies in which you are getting benefits (child tax benefit, gst, etc). Otherwise you wind up having to pay back all the money once they find out you weren't a resident. I've read a few circumstances where people assumed nobody would find out they were in the US and then got a whopper of a bill saying they owed the money back.

[NikLR 13,220]

Heck I sent the GST money BACK to them and they mailed it BACK to me in the USA!!!  I ended up just keeping it into a Canadian bank account until tax time because trying to cancel it never seemed to work. 

[Marzena & Stephen 544]

On 12/18/2017 at 6:05 PM, greentea123 said:

Hi everyone! I've been undergoing the CR1 visa process for the past year. I had my interview on November 20th at the US Consulate in Montreal and received my passport with the visa in it at the end of November. As I prepare and plan for my POE next week, I'm tying up loose ends in Canada - including my finances.

 

My main question is related to my TFSA and RRSP: what are some recommendations for maintaining or collapsing if the total value is less than $15,000 CAD? Should I leave them as is, or should I withdraw/collapse both and leave them in a Savings account? I'd prefer to keep Canadian funds in Canada.

 

Also, do I need to inform the CRA about changing my residency before I leave? Or after?

 

Any advice on navigating these topics would be appreciated!

 

Cheers!

Hi

I withdrew my tax free savings account funds before I moved. Reason for this. They are no longer tax free when you move to the USA. So any Interest made in those account are taxable every year on your USA taxes. It's pretty annoying to have to claim that income. It sort of becomes like a regular savings account. That being said if you have a regular savings account the same thing happens. You have to pay tax every year on interest made. 

 

I put the money into an rrsp. The USA and Canada has an agreement that any amount your rrsps go up in value is tax free (from my understanding -anyome quote me if I'm wrong please ! ) 

 

I kept my pension account in canada aswell as from my understanding the total it earns was also tax free. (Please again quote me if im wrong)

 

I have money in my chequeing account (not collectng any interest) 

This helps if you are claiming unemployment insurance as they deposit into your Canadian account.

It helps pay back gst if they pay you in error. It also helps having an online account to pay your Canadian credit cards with if you are keeping your Canadian credit cards which I did and yes it is allowed since we are still Canadian citizens.

 

I also didn't want to exchange all my money to USD and put it into my USA account as the exchange is terrible and you lose alot of money so i plan to do this once the exchange levels out a little but more.

I however did take some money out to help me for the next few months.and yes I did lose alot of it because of the exchange and no i didn't have to pay taxes on bringing money into USA.

 

I did apply for a deducted discover it credit card to build my credit in USA. He bank and bmo bank in Canada would not help using my Canadian credit to get USA credit unfortunately. That being said I made a deposit on a secured credit card.

 

I didn't want to completely close my Canadian accounts because it is always nice to keep your credit rating going there but at the end of the day it doesn't matter if you never intend to move back. 

 

I went online onto canada.ca and updated my cra account to my new address. It was easy. If you receive gst credits that you are no longer eligible to get than you may still keep getting them but you can pay them back online aswell under canada.ca my payments (child family tax credits) and eventually your account will be corrected to USA and stop these payments.

[NikLR 13,220]

RBC usa and Canada are one of the only banks that will use Canadian credit for a credit card once you are working.  

BMO and TD people always seem to have issues.