Any individual that is a non-resident of Canada who has a valid SIN and who is 18 years of age or older is also eligible to open a TFSA. However, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account.
An individual can contribute to a tax-free savings account (TFSA) only while he or she is a resident of Canada; any contributions made while he or she is a non-resident are subject to a penalty tax of 1 percent per month.
U.S. Equivalent of the TFSA — Meet the Roth IRA. The Roth IRA is equivalent to the Canadian TFSA. Any contributions that you do make in those accounts are all post-tax.
A tax-free savings accounts USA (TFSAs) is the best way for individuals to save towards their financial goals. The capital gains and investment income earned from TFSAs are usually free from tax. As a result, it gets easier to save money for short-term and long-term goals.
Is there a U.S. side to a TFSA? Yes, you can hold and settle trades in U.S. dollars in your TFSA. You can also contribute and withdraw in U.S. dollars if you have an RBC U.S. dollar bank account.
The Canadian equivalent of a Roth IRA is a TFSA. Although the plans have differences, there are significant similarities. A Roth IRA and a TFSA are funded with after-tax dollars, and the growth and income earned in the account can be free from taxation if the rules are followed.
Tax Benefits: Capital gains are tax-free in a TFSA, allowing for long-term growth.
Canadians must continue working or leave. A solution for retirees is either to continue working part-time, self-employ, or to have applied for permanent residence (green cards) well before employment ends. An excellent route to U.S. living rights is permanent residency. Permanent is better than temporary.
A TFSA is not recognized as such in foreign countries. You must stop making contributions on the date you become an official non-resident. If you make contributions while you are a non- resident of Canada, you'll be subject to a 1% in addition to other applicable taxes.
Unfortunately, TFSA contributions can't be used to lower your taxable income. This means there is no way to decrease your income tax when contributing to a TFSA. For high income earners this makes an RRSP more appealing.
It's best not to invest in a TFSA as a dual citizen or expat as it causes additional complicated tax reporting and increased costs. You aren't limited by PFIC rules when investing in an RRSP as it is recognized by the Canada/US Tax Treaty.
If you hold a TFSA when you leave Canada, you can keep it and continue to benefit from the exemption from Canadian tax on investment income and withdrawals. However, you cannot contribute to your TFSA while you are a non-resident of Canada, and your contribution room will not increase.
That is because the United States does not recognize a TFSA similar to an RRSP or RRIF for tax deferral purposes –and therefore even though the stock and bonds may be wrapped in a TFSA, they would still presumably be taxable unless the taxpayer was to make a treaty election if they qualify.
What is the lifetime limit for TFSA? While there is no lifetime limit, the maximum contribution room for people who have lived in Canada their entire life, were 18 or older when TFSAs were first introduced in 2009, and who have never contributed to a TFSA could be as high as $95,000 in 2024.
Canada and the U.S. have an income tax treaty (convention) to prevent double taxation for U.S. citizens working and living in Canada and Canadian tax residents with U.S. income. The treaty helps prevent individuals from being taxed twice, once by Canada and once by the U.S., on certain types of income.
Most U.S. citizens can get Social Security benefits while visiting or living outside the U.S. Find out if you qualify, how to apply, and who to contact to get help.
Retiring abroad on $1,000 per month doesn't mean sacrificing quality of life. Many countries offer excellent health care, infrastructure and amenities at a fraction of the cost compared to the U.S. The cheapest places to retire abroad include Panama, the Philippines, Portugal, Malaysia, Mexico, Thailand and Vietnam.
Assets in your TFSA are not subject to departure tax, and earnings in the account, as well as withdrawals, will still be tax-free for Canadian tax purposes. However, you will not be allowed to contribute to your TFSA while you're in the U.S.; no contribution room will accrue while you are a non-resident of Canada.
A TFSA is similar to a Roth individual retirement account in the United States, although a TFSA has no withdrawal restrictions, such as the unqualified withdrawal penalty of the Roth IRA.
Both types of accounts shelter interest and investment income from tax. TFSA contributions are not tax-deductible. The tradeoff, however, is that withdrawals from a TFSA are tax-free. RRSP contributions are tax-deductible, which means that they can help reduce the amount of tax you pay for that year on your income.
Pensions in the United States consist of the Social Security system, public employees retirement systems, as well as various private pension plans offered by employers, insurance companies, and unions.
The average retirement savings for Canadians is close to $272,000 while the average RRSP balance stands at $129,000 in 2024. Aditya Raghunath joined the Motley Fool Canada team in 2019 and has close to seven years of experience in covering publicly-listed companies.
Conclusion: All persons who moved to Canada during a year must file an election by April 30 of the following year (due date of return) to ensure that income earned within the Roth IRA from contributions made while a nonresident of Canada will be deferred, and considered "pension income" under the Treaty.