Q&A With Gordon Pape: Dual Citizenship And TFSAs
A reader wants to know: Does the IRS tax returns on a Canadian plan?
Q – I have dual citizenship with the U.S. and Canada. Can I have a TFSA in Canada that will not be taxed in the U.S. since I have to file tax returns for both countries? Or will the IRS (Internal Revenue Service) see funds and dividends from that account as income to be taxed (even though it is taxed income in Canada before entering the TFSA). I believe the U.S. has a similar type of account as the TFSA. – Robert P.
A – Any income earned in the TFSA is considered to be taxable in the U.S. The Canada-U.S. tax treaty recognizes retirement savings plans and exempts them, but the TFSA does not qualify. So while your earnings inside the plan will escape tax here, you’ll be assessed in the States. – G.P.
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