US Expat Taxes in Canada
North AmericaTax Treaty
Yes
Tax System
worldwide
Social Security
Totalization Agreement
FEIE Qualification in Canada
Physical Presence Test
Living near the US-Canada border makes accidental disqualification common. Every day spent in the US counts against the 330-day requirement. Carefully log all cross-border trips including short shopping or family visits.
Bona Fide Residence Test
Permanent Resident status (PR card) or a valid work permit strongly supports bona fide residence. Filing Canadian taxes and maintaining a Canadian home, bank accounts, and social ties are key factors.
Common Visa Types:
Canada Tax System
Taxes residents on their worldwide income, regardless of where it is earned.
Tax Rates
Federal progressive rates from 15% to 33%, plus provincial rates varying by province (5.06%-25.75%)
The US has a Totalization Agreement with Canada, preventing double Social Security taxation.
US-Canada Tax Treaty
Treaty signed: 1980
Key Provisions:
- Reduced withholding rates on dividends (15% general, 5% for 10%+ corporate ownership)
- Pension and annuity provisions with 15% withholding cap
- Social Security benefits taxed only in country of residence
- Exchange of information and mutual agreement procedures
Banking & FBAR in Canada
Major Banks (CAD)
FBAR Reminder
All Canadian bank accounts, RRSPs, TFSAs, and investment accounts must be reported on FBAR if aggregate balances exceed $10,000. RRSPs and RRIFs require annual Form 8891 reporting (now included in treaty-based positions on Form 8833).
FATCA Compliance
Canada signed a Model 1 IGA with the US in 2014. Canadian financial institutions report US person account information to the CRA, which shares it with the IRS. US citizens opening Canadian accounts must declare US tax status.
Common Pitfalls for Americans in Canada
Forgetting to report RRSPs and TFSAs on FBAR and FATCA forms, which carry steep penalties
Not making the treaty election to defer tax on RRSP/RRIF income (Form 8891 / Form 8833)
Frequent US border crossings inadvertently breaking the FEIE physical presence test
Double taxation on Canadian-source capital gains if Foreign Tax Credit is not properly claimed
Overlooking provincial tax obligations which vary significantly across Canada
Cost of Living Overview
Monthly Estimate
$2,000-$3,500
vs. US
Comparable to or slightly higher than US average, varies by province
Notes
Toronto and Vancouver are among the most expensive cities. Smaller cities in the Prairie provinces and Atlantic Canada offer significantly lower costs. Healthcare is publicly funded, reducing one major US expense.
FAQ: US Taxes in Canada
Do I need to file taxes in both the US and Canada?
Yes. US citizens and green card holders must file US taxes on worldwide income. If you are a Canadian tax resident, you also file with the CRA. The US-Canada tax treaty and Foreign Tax Credits prevent most double taxation, but proper planning is essential.
How are my RRSP and TFSA treated for US tax purposes?
RRSPs can be tax-deferred for US purposes under the treaty if you file the proper election. However, TFSAs are NOT recognized as tax-advantaged by the IRS - all income earned inside a TFSA is taxable on your US return. Both must be reported on FBAR and potentially FATCA Form 8938.
Can I claim the FEIE while living in Canada?
Yes, but given Canada's high tax rates, most expats benefit more from the Foreign Tax Credit (Form 1116) than the FEIE. Since Canadian taxes often exceed US taxes on the same income, FTC can eliminate your US liability and generate carryover credits.
How does the US-Canada totalization agreement work?
The agreement prevents double Social Security/CPP contributions. If you work for a US employer temporarily in Canada, you continue paying US Social Security. If employed locally in Canada, you pay into CPP. Work credits from both countries can be combined to qualify for benefits in either country.
Are my Canadian pension benefits (CPP/OAS) taxable in the US?
Under the treaty, Canadian CPP and OAS benefits received by a US resident are generally taxable only in the US. If you reside in Canada, they are taxed in Canada. The treaty prevents double taxation on these pension payments.