Canadian Cross-Border Tax FAQ: 12 Common Questions

Cross-border tax questions span four distinct scenarios: Canadians who have left Canada, US citizens living in Canada, Canadian snowbirds spending time in the US, and Canadians returning from abroad. The following 12 questions cover the most common issues across all four scenarios.

1. Can I withdraw from my RRSP after I leave Canada?

Yes. RRSP withdrawals as a non-resident are subject to Canadian non-resident withholding tax. The default withholding rate under Part XIII of the Income Tax Act is 25% on lump-sum withdrawals. Under the Canada-US Tax Treaty, the withholding rate is reduced to 15% for periodic payments (annuity-type payments) and 25% for lump-sum withdrawals. Withdrawals are reported on a Canadian NR4 slip, not a T4RSP, once you are a non-resident.

In the US, RRSP distributions are fully taxable as ordinary income if the treaty deferral election was in place (common for US citizens and green card holders who held the RRSP before becoming US tax residents). No further Canadian tax is assessed after the withholding, and you can claim a foreign tax credit on your US return for the 25% or 15% Canadian withholding.

2. Can I collect CPP and OAS while living outside Canada?

Yes. CPP and OAS are payable to non-residents. The withholding tax rate on CPP/OAS for non-residents is 25% under Part XIII, reduced to 15% under the Canada-US Treaty for US residents and for residents of other treaty countries with comparable rates. You must submit Form NR21 to the CRA to confirm your entitlement to the treaty rate.

OAS has an additional consideration: the OAS clawback (Recovery Tax) applies based on your world income if you are a Canadian resident, but not for non-residents — the clawback is replaced by withholding at source. You do not file a Canadian return for OAS/CPP income as a non-resident; the withholding is your final Canadian tax on those amounts.

3. Do I lose OAS if I move abroad permanently?

No. OAS is portable. You continue to receive OAS if you have accumulated the required years of residence in Canada (10 years of residence in Canada after age 18 to receive OAS while outside Canada; 40 years for the full pension). Years of residence under the Canada-US Totalization Agreement may top up your Canadian period of residence if you have Social Security credits in the US.

4. What happens to my TFSA when I leave Canada?

Contributions while a Canadian resident remain in the TFSA and continue to grow. After you become a non-resident, you may keep the existing TFSA open. However:

• You cannot make new contributions as a non-resident. Any contribution after becoming a non-resident attracts a 1% per month penalty tax on the excess amount (which equals any contribution, since non-residents have zero TFSA room).
• Growth inside the TFSA is no longer tax-free for Canadian tax purposes once you are a non-resident. Income and gains in the TFSA after departure are subject to Part XIII withholding (25%, potentially reduced by treaty).
• The TFSA is not recognized as a tax-deferred plan by the US for US citizens. See the TFSA US tax treatment guide.

Most financial planners recommend withdrawing the TFSA balance before departing Canada to receive the tax-free treatment while still a resident.

5. As a US citizen in Canada, is my TFSA taxable in the US?

Yes. The IRS does not recognize the TFSA as a tax-deferred retirement or savings plan. Income and gains inside the TFSA are taxable on your US 1040 in the year earned, regardless of the Canadian exemption. Additionally, the TFSA must be reported on FBAR (FinCEN 114) and potentially Form 8938 depending on total foreign account balances. There is ongoing uncertainty about Form 3520/3520-A foreign trust reporting for TFSAs. See the full TFSA US tax guide for details.

6. Is my Canadian estate subject to US estate tax?

If you are a non-US citizen who is not domiciled in the US (a Canadian resident with no intention of making the US your permanent home), the US estate tax applies only to US-situs assets. US-situs assets include US real property, shares of US corporations, US bank accounts (with limited exceptions), and US-located tangible property.

The Canada-US Tax Treaty contains an estate tax protocol that provides a unified credit to Canadian residents proportional to their US-situs assets relative to total worldwide assets. For Canadians with modest US holdings (a vacation property, a US brokerage account), the estate tax exposure is often below the unified credit threshold. For substantial US-situs holdings, specialist US estate planning is needed.

7. What are the treaty rates for Canadian dividends and interest paid to US residents?

Under Article X and XI of the Canada-US Tax Convention:

• Dividends from Canadian companies to US residents: 15% withholding (5% if the US recipient is a corporation controlling 10% or more of the Canadian company’s voting shares).
• Interest from Canadian sources to US residents: 0% withholding for most forms of interest under the 1995 protocol. Bank interest, interest on bonds, and publicly-traded debt pay zero Canadian withholding to US recipients. Certain contingent interest may still be subject to 15%.
• RRSP / RRIF withdrawals: 25% withholding (lump sum) or 15% (periodic).

These rates assume the payer files an NR4 and the recipient has provided a W-8BEN (for individuals) confirming US residency.

8. What does a cross-border tax accountant cost?

Expect to pay between $1,500 and $5,000 CAD per year for a cross-border tax practitioner who files both Canadian and US returns. The range reflects complexity: a retired snowbird with CPP, OAS, and no US-source income is on the lower end; a self-employed professional with US clients, an RRSP, Canadian investments, and stock options is on the higher end.

Cross-border specialists (designated as “CPA (US/CA)” or enrolled agents with Canadian training) charge a premium over domestic-only accountants because they must maintain currency in two tax systems. The cost is generally deductible as a professional fee on both returns.

9. What is an NR4 slip and when do I receive one?

An NR4 (Statement of Amounts Paid or Credited to Non-Residents of Canada) is the Canadian equivalent of a 1099 or T4RSP for non-residents. It documents amounts paid to you by a Canadian payer — RRSP/RRIF withdrawals, CPP/OAS, dividends from Canadian companies, rental income, and other Canadian-source income — along with the withholding tax deducted.

NR4 slips are issued by the 15th of March following the calendar year. You will need the NR4 to claim the foreign tax credit on your US return for the Canadian withholding deducted. Keep NR4s with the same diligence as T4s.

10. Did I lose the principal residence exemption on my home when I emigrated?

No, not on prior years. The principal residence exemption (PRE) applies to years during which you designated the property as your principal residence while a Canadian resident. You do not lose those years retroactively.

However, the year of departure is your last eligible year for the PRE if you are selling the property or claiming a deemed disposition. Years after your departure during which you are a non-resident are not eligible for the PRE. If you kept the property after emigrating and sell it years later, gains accrued during the non-resident years will not be sheltered, and the gain will be subject to non-resident withholding and a potential reporting obligation under section 116.

11. Is the FHSA portable for cross-border situations?

The FHSA (First Home Savings Account) was introduced in 2023 for Canadian residents who have never owned a home. Cross-border treatment is not yet fully settled:

• On departure from Canada: FHSA assets are subject to the same deemed disposition rules as other property. Unlike TFSAs, FHSAs may not be kept open indefinitely as a non-resident. The CRA’s guidance indicates that non-residents cannot hold open FHSAs after departure.
• For US citizens: the IRS has not issued guidance on FHSA treatment. The FHSA is likely treated similarly to the TFSA — no US-treaty recognition, annual taxation of income and gains, potential Form 3520 exposure.
• Best practice: If you are a US citizen and eligible for an FHSA, consult a cross-border specialist before opening one.

12. What happens to an RESP if I leave Canada?

If you leave Canada and the subscriber or beneficiary becomes a non-resident, contributions to the RESP must stop. Government grants (CESG, CLB, provincial grants) may need to be repaid if the beneficiary becomes a non-resident before using the grant for education.

The RESP can remain open and can be transferred or collapsed. On collapse, the accumulated income portion (AIP) is taxed as ordinary income plus a 20% penalty tax. Alternatively, the AIP can be transferred to your RRSP if you have available contribution room — avoiding the penalty tax but triggering RRSP deduction rules.

For US citizens, RESP assets may also be subject to FBAR reporting and potentially PFIC rules on mutual fund holdings inside the plan.

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For a comprehensive analysis of your specific cross-border tax situation — leaving Canada, returning from abroad, or managing ongoing obligations — use the tools at the link below.

Cross-Border Canada Tax Tools