Tax Obligations for U.S. Citizens Living in Canada

By Nordfiscus – Cross-Border Tax Specialists

Are you a U.S. citizen living in Canada? Wondering if your American citizenship still comes with tax responsibilities—even years after leaving the U.S.? If so, you're not alone, and this guide is for you.

Who Is Considered a U.S. Citizen?

You might be surprised to learn how broad the definition is. Anyone born in the United States is automatically considered a U.S. citizen—even if they’ve never lived there beyond birth or have no family ties to the country. Green card holders (lawful permanent residents) are also subject to the same tax obligations.

U.S. Tax Filing Obligations

The U.S. taxes based on citizenship, not just residency. This means that even if you live in Canada full-time, you're still required to file a U.S. federal income tax return each year and report your worldwide income.

Important Deadlines:

• April 15: Standard U.S. tax filing deadline.

• June 15: Automatic extension for U.S. citizens living abroad.

• October 15: Additional extension available upon request (applies to filing only, not payment).

  
  

Depending on your situation, you may also need to file state tax returns (e.g., if you have rental income from a U.S. property).

Dual Taxation: U.S. and Canada

As a Canadian tax resident, you're also required to report global income to the Canada Revenue Agency (CRA). This results in dual tax reporting, but not necessarily double taxation.

Thankfully, there are tools to mitigate this:

• Foreign Earned Income Exclusion (FEIE): Allows U.S. citizens to exclude a portion of foreign employment income.

• Foreign Tax Credits: Available under the U.S.–Canada tax treaty to avoid paying tax twice on the same income.

• Treaty Provisions: Some income, like social security, is taxed by only one country under the treaty.

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Reporting Foreign Assets

Living in Canada comes with extra IRS paperwork. U.S. citizens and green card holders must report certain foreign assets and accounts annually:

• FBAR (FinCEN 114): Required if the total value of foreign accounts exceeds USD $10,000.

• Form 8938 (FATCA): Additional asset reporting for higher-value thresholds.

• TFSA & RESP: While these are tax-advantaged in Canada, they are not recognized as such by the IRS. Income is generally taxable in the U.S., and special forms are required.

• Canadian Corporations: If you own shares in a Canadian business, you may have to report detailed information and potentially pay U.S. tax on the company’s income—even if it stays in the corporation.

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Penalties for not filing these forms can be steep, but relief may be available for first-time or non-willful omissions.

Getting Back on Track with the IRS

If you haven’t filed U.S. tax returns in years—or ever—the IRS offers programs to help you catch up without penalties, including:

• Streamlined Foreign Offshore Procedures: For taxpayers living abroad who were unaware of their obligations.

• Relief Procedures for Former Citizens: Introduced in 2019 for those who renounced citizenship but never filed required tax returns.

Renouncing U.S. Citizenship or a Green Card

Planning to give up your U.S. citizenship or green card? Before doing so, you must be current with all tax filings, or you could face the U.S. expatriation tax, a special tax for certain individuals who give up their status.

Need Help Navigating Cross-Border Tax?

At Nordfiscus, our team of experienced U.S. tax professionals can guide you through every step—from catching up on past returns to ongoing compliance and renunciation support. Contact us today for a confidential consultation and take the stress out of your U.S. tax obligations.