A taxpayer can continue to contribute to his or her RRSP after emigrating from Canada. Contribution room is based on Canadian-source income, such that taxpayers who cease earning Canadian source income (e.g. employment income) after emigration will stop accruing RRSP contribution room.
Are RRSP withdrawals taxable in the US?
The IRS considers income that accrues in RRSPs to be subject to U.S. income taxation even if it has not been distributed. However, a U.S. citizen or Canadian citizen who is resident in the U.S. can elect to defer income until it is distributed, using IRS form 8891 to make the election.
Can a non-resident contribute to an RRSP in Canada?
Income and gains in an RRSP are considered tax-free in Canada and in many foreign countries with which Canada has tax treaties and where non-residents may live. As such, non-resident taxpayers may consider contributing to RRSPs for various reasons, if they have Canadian taxable income and RRSP contribution room.
How much tax do you pay on withdrawal from a RRSP in Canada?
In some circumstances the Canadian tax will be 25 percent of the withdrawal. In other cases, the rate is 15 percent. Usually this result from assets in an RRSP being converted at retirement to an RRIF annuity, which enjoys the lower tax rate provided that the money is periodically withdrawn.
Why are US citizens allowed to open Canadian RRSPs?
The technical explanation to the Convention states that the purpose of this provision is to avoid a mismatch of U.S. taxable income and foreign tax credits attributable to the Canadian tax on such distributions.
Do you have to leave your RRSP if you move to the US?
Accordingly, persons moving to the U.S. after a work period in Canada should consider leaving the RRSP intact, and drawing funds from the plan only upon retirement or as required by Canadian law.
