How Canadian Registered Accounts Affect US Citizens

If you are a US citizen living in Canada or holding Canadian investment accounts, you might wonder how your TFSA, RRSP, FHSA, or RESP impacts your US tax return. While these accounts offer tax advantages in Canada, the United States often treats them differently.

Understanding the US reporting and tax treatment of these accounts is essential to staying compliant and avoiding unnecessary tax liabilities.

RRSPs and RRIFs

Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) are relatively US friendly.

Thanks to the US Canada tax treaty:

• You do not need to file Form 8891 (this form was eliminated in 2014)

• Tax on earnings inside the RRSP is deferred until withdrawal

• The accounts must still be reported on FBAR and possibly Form 8938

TFSAs and FHSAs

Tax Free Savings Accounts (TFSAs) and First Home Savings Accounts (FHSAs) are not treated as tax free by the IRS.

Key points:

• These accounts are not considered foreign trusts

• However, income and gains must be reported annually

• This income may be taxable in the US, even if exempt in Canada

• You must still include these accounts on FBAR and possibly Form 8938

RESPs

Registered Education Savings Plans (RESPs) used to require complex trust reporting.

As of 2024:

• Form 3520 and 3520 A are no longer required

• However, income earned within an RESP may still be taxable in the US

• The accounts should still be reported on FBAR and Form 8938

Why It Matters

Even if you are not taxed in Canada, the IRS may still expect to see income from these accounts on your US return. While penalties for unfiled forms like 3520 have eased, income omission can still result in tax liability and interest.

What You Can Do

• Keep good records of contributions, income, and gains

• Work with a cross border tax expert

• Report accounts on FBAR and Form 8938 annually

• Include any US taxable income from these accounts in your return

Final Thoughts

Canadian registered accounts are great savings tools in Canada but can carry unexpected tax consequences for US citizens. With careful planning and expert support, you can stay compliant while maximizing your financial goals.

At Nordfiscus, we help cross border families navigate the complexities of US Canada taxation.