Q&A With Gordon Pape: TFSAs and the U.S.

Q – I understand that if you have a TFSA and hold U.S. citizenship that you must pay tax on any earnings to the U.S. government. Why is this so when the U.S. has a similar tax-free vehicle? Is anything being done to approach the U.S. government for equivalent status based on the tax treaty? – M.K.

A – Tax-Free Savings Accounts are not considered to be “retirement plans” within the terms of the Canada-U.S. Tax Treaty. That means they are not recognized by the Treasury Department as being tax-sheltered. Any change in that would involve amending the Tax Treaty. I am not aware of any action under way to achieve that. – G.P.