This blog post summarizes different tax-advantaged accounts in Canada and the US, and their tax treatments for people looking to move from one country to the other.

Tax-Advantaged Accounts in Canada

Account	Tax treatment in Canada	Tax treatment in the US under tax treaty
RRSP	– Contribution is pre-tax and reduce taxable income. Employers usually match certain % of contribution. – Withdrawal of Contribution and Gain is tax deferred.	– Similar to 410K and IRA in the US – Recognized tax deferred status under tax treaty
TFSA	– Contribution is after-tax. – Withdrawal of Contribution and Gain is tax free.	– Similar to Roth 410K and Roth IRA in the US – Not recognized under tax treaty
RESP	– Eligible if the beneficiary is under 21 years old. – Contribution is after-tax. Government match 20% of contribution to up to $500 grant (CESG) per year. – Withdrawal of Contribution is tax free. Withdrawal of Gain is tax deferred for education. – Up to $50,000 Can be transferred into RRSP	– Similar to 529 Plan in the US – Not recognized under tax treaty
FHSA	– Eligible if you have not owned a home in the past 4 years – Contribution is pre-tax and reduce taxable income. – Withdrawal of Contribution and Gain is tax deferred. Withdrawal for first home purchase is tax free.	– Not recognized under tax treaty

If you are a Canada resident looking to move to the US:

• Only RRSP tax-deferred status will be recognized by IRS in the US.
• Gain in TFSA, RESP, FHSA, and non-registered accounts will be taxable in the US. In addition, investors holding Canadian mutual funds, ETFs, and Real Estate Income Trusts (REITs) should be aware that these investments are typically classified as Passive Foreign Investment Companies (PFICs) by the IRS, with extremely punitive tax consequences for US tax filers.

Tax-Advantaged Accounts in the US

Account	Tax treatment in the US	Tax treatment in Canada under tax treaty
401k	– Eligible if your employer provides 401k. – Contribution is pre-tax and reduce taxable income. Employers usually match certain % of contribution. – Withdrawal of Contribution and Gain is tax deferred.	– Similar to [employer-sponsored] RRSP in Canada – Recognized tax deferred status under tax treaty
IRA	– Contribution is pre-tax and reduce taxable income, only if your income is below a certain threshold. – Withdrawal of Contribution and Gain is tax deferred.	– Similar to [individual] RRSP in Canada – Recognized tax deferred status under tax treaty
Roth 401k	– Eligible if your employer provides 401k. – Contribution is after-tax. – Withdrawal of Contribution is tax free. Withdrawal of Gain is tax free after 5 years of account opening AND after 59.5 years hold.	– Similar to TFSA in Canada – Not recognized under tax treaty, unless with special election when you resume Canadian tax residency AND there is no further contribution.
Roth IRA	– Eligible if your income is below a certain threshold. – Contribution is after-tax. – Withdrawal of Contribution is tax free. Withdrawal of Gain is tax free after 5 years of account opening AND after 59.5 years hold. – Backdoor contribution from IRA to Roth IRA is possible	– Similar to TFSA in Canada – Not recognized under tax treaty, unless with special election when you resume Canadian tax residency AND there is no further contribution.
529	– Contribution is after-tax. – Withdrawal of Contribution is tax free. Withdrawal of Gain is tax free for education. – Excess 529 funds can be converted to Roth IRA, up to $35,000	– Similar to RESP in Canada – Not recognized under tax treaty
HSA	– Eligible only if you have high-deductible health plan (HDHP) – Contribution is pre-tax and reduce taxable income. Employers usually match certain % of contribution. – Withdrawal of Contribution and Gain is tax free for medical or after 65 years old.	– Very different from Health Spending Accounts (HSAs) in Canada, which is more similar to Flexible Spending Account (FSA) in the US – Not recognized under tax treaty

If you are a US resident looking to move to the Canada:

• 401K and IRA tax-deferred status will be recognized by CRA in Canada. You will need to consider:
  • whether to keep 401K and IRA account
  • whether to convert 401K and IRA account to Roth IRA
  • whether to move funds from 401K and IRA account to RRSP
• Gain in Roth 401K and Roth IRA will be taxable in Canada, unless with special election to recognize tax-free status of Roth IRA, and there is no further contribution.
• Gain in 529 Plan, HSA, and non-registered accounts will be taxable in Canada. Investors holding US mutual funds should be aware that these investments are meant only for US residents and might not be allowed after you become US non-residents. Investors holding US municipal bonds should be aware that there is no further tax advantage to doing so once they have exited the US