Canada vs US Tax — Side-by-Side Comparison

Retirement: RRSP vs 401(k), TFSA vs Roth IRA

RRSP and 401(k) are the tax-deferred cousins. Contributions reduce taxable income now, growth compounds untaxed, and withdrawals are fully taxable at marginal rates. US 401(k)s typically come with employer matching (~80% of plans), which Canadian RRSPs don't unless they're set up as Group RRSPs. The 2026 RRSP limit is $33,810 (18% of earned income); the 2026 401(k) limit is $24,500 — and US catch-up provisions (+$8,000 at 50; +$11,250 at 60–63 under SECURE 2.0) make late-career contributions larger still.

TFSA and Roth IRA are the tax-free cousins. Contributions are post-tax, but growth and qualified withdrawals are untaxed. TFSA is simpler (no income limits, re-contribute previously withdrawn amounts) and has a larger cumulative cap for long-time residents ($109,000 in 2026 if you've never contributed and were 18+ in 2009). Roth IRA has a MAGI phase-out ($153k single / $242k MFJ for 2026) that shuts high earners out — backdoor Roth conversions are the common workaround.

If you have both US and Canadian tax obligations, TFSAs are a trap — the IRS does not recognize them as tax-advantaged, so growth and withdrawals are generally taxable on Form 1040. RRSPs are protected by the Canada–US tax treaty and IRS Rev. Proc. 2014-55 (no longer require Form 8891) but still report on Form 8938 / 3520 if balances exceed reporting thresholds.

If you're moving Canada → US

• Deemed disposition: CRA taxes you as if you sold most non-registered assets on emigration day. File Form T1161 (list of properties) and T1243 (deemed disposition of property). Principal residence and RRSP/TFSA are excluded from deemed disposition.
• TFSA warning: The IRS does not recognize TFSAs. Contributions while a US resident are treated as taxable, growth may be taxable annually, and many advisors recommend closing the TFSA before or during the move.
• RRSP handling: Keep it in Canada. Under the Canada–US treaty, growth is deferred; elect on Form 8938 / 3520 if required. Withdrawals are taxable in both countries with a foreign tax credit.
• Capital gains: US uses separate long-term rates (0% / 15% / 20%) — typically lower than Canada's 50% inclusion applied at marginal rate for higher earners.

If you're moving US → Canada

• No deemed sale: Canada doesn't tax US capital gains at entry — you get a stepped-up cost base equal to fair market value on the day you become resident.
• US citizenship tax: US citizens (and green card holders) remain subject to US tax on worldwide income regardless of residency. File Form 1040 every year, plus Form 2555 (foreign earned income exclusion up to ~$130k) or Form 1116 (foreign tax credit).
• 401(k) handling: Can stay in the US; periodic withdrawals under the Canada–US treaty qualify for reduced 15% US withholding. Lump-sum withdrawals face 30% US withholding.
• Higher marginal rates: Ontario + federal marginal rate tops out at ~53.5% vs. California + federal at ~50.3%. High-income Canadians often see 10+ percentage-point higher tax vs. no-state-tax US states.