If you plan on keeping your Roth IRA while you’re a Canadian resident, you need to follow these rules or you will lose the tax-free status in Canada. You don’t want that.
Do not contribute
While you’re a Canadian resident, do not contribute to your Roth IRA. Any contribution made while resident in Canada is a “Canadian contribution” in the CRA’s terms, and it permanently taints the account: the growth on that portion loses its tax-free status in Canada. It also becomes an accounting nightmare: you do not get the correct tax slips as a Canadian resident, and your accountant will be scrambling, which costs you more money.
File a one-time election
The solution is to file a one-time election form for your Roth IRA. If you have more than one, you need an election for each. The election confirms you are requesting alternative tax treatment for each Roth account so that it is treated like a pension under the Canada–U.S. tax treaty. This lets you hold the Roth and maintain its tax status while in Canada.
There is a specific timeline: the CRA asks for the election by the filing due date of your tax return for the year you became a Canadian resident. For most people that is April 30 of the following year, or June 15 if you or your spouse are self-employed. The CRA has accepted late elections, but do not count on it.
Follow those steps and you can keep your Roth IRA as a Canadian resident and keep your options open for the future.
DisclaimerThis article is provided by Cross Border Wealth for general information and education only. It is not personalized financial, investment, tax, legal, accounting or immigration advice, and it is not an offer or solicitation to buy or sell any security or to use any service. The information comes from sources believed to be reliable, but we cannot guarantee that it is accurate, complete or current. Tax and securities rules in Canada and the United States change often. An article reflects the rules as the author understood them on its publication date, or on the update date shown. Articles are not continuously monitored or revised after publication, so an older article may no longer be current. Check the date and the official sources listed at the end of the article before acting. The views expressed are those of the author, Chris Mills. Cross Border Wealth does not provide advisory services and is not a registered dealer, adviser, accounting firm or law firm. The author writes in a personal capacity, and their views do not represent any firm they are associated with. Obtain independent advice from a qualified cross-border tax, legal or immigration professional before acting on anything you read here. Any investment decision should be reviewed with a licensed advisor to confirm it is suitable for your circumstances, objectives and risk tolerance. Any professional you are introduced to through this site may only conduct business with residents of the jurisdictions in which they are properly registered. Case examples are illustrative and do not guarantee a similar result for anyone else.
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Chris is a cross-border financial advisor licensed in both Canada and the United States. He helps Americans moving to Canada and Canadians moving to the U.S. keep their retirement accounts intact and build one plan that covers both sides of the border. He writes for Cross Border Wealth in his personal capacity.
Disclosure:Chris writes in his personal capacity; his views do not represent any firm he is associated with. Cross Border Wealth does not provide advisory services. If you need advice, use the Get connected form and we will introduce you to a licensed professional.
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