Canada → USA

The USA is the most common Canadian emigration destination — but dual tax complexity (Substantial Presence Test, RRSP treaty deferral, TFSA forced liquidation, CCPC reclassification as a Controlled Foreign Corporation) means the crossing is harder than the distance suggests.

Last reviewed: May 23, 2026

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TaxKiln framework

Five-Stage Emigration Tax Lifecycle

TaxKiln's lifecycle framework for Canadian emigration tax: (1) pre-departure planning — asset reorganisation, CDA extraction, LCGE crystallisation, RRSP/TFSA timing, provincial residency strategy; (2) departure tax crystallisation — s.128.1(4) deemed disposition, T1243/T1161, T1244 security; (3) treaty positioning — Article IV tie-breaker, destination pension/RRSP treatment, withholding reduction; (4) post-departure compliance — Section 116 on TCP, Part XIII on passive income, provincial trailing tax; (5) return — s.128.1(7) basis reset, foreign retirement account elections, TFSA/RRSP room recalculation.

1. US residency on entry

The US triggers tax residency under the Substantial Presence Test (IRC §7701(b)) — 31 days in the current year plus a weighted 183 over the three-year lookback. The Closer Connection Exception (Form 8840) can defer residency if you remain <183 days. Once both jurisdictions claim you, the Canada–US treaty Article IV tie-breakerallocates residency. A dual-status year typically results in the year of move, requiring both 1040-NR (pre-move) and 1040 (post-move) portions.

2. RRSP / RRIF — Rev Proc 2014-55

Under Rev Proc 2014-55 RRSPs and RRIFs are automatically deferred for US tax purposes (no Form 8891 required since 2014). Internal growth is sheltered until distribution. On withdrawal, Canada applies 25% Part XIII withholding (15% for periodic pension payments under treaty Article XVIII(2)(a)); the US taxes the distribution but grants a Foreign Tax Credit. FBAR (FinCEN 114) and FATCA Form 8938 still apply.

3. TFSA — liquidate before departure

The US does not recognise the TFSA wrapper. Worse: most TFSAs hold Canadian mutual-fund or ETF units which the IRS classifies as Passive Foreign Investment Companies (PFICs) — triggering punitive §1291 taxation and Form 8621 annually. Most cross-border specialists collapse the TFSA before the US residency start date, then re-deploy in US-domiciled vehicles.

4. RESP

The RESP is treated as a foreign grantor trust by the IRS. Designating a Canadian-resident subscriber (a grandparent who remains in Canada) keeps the wrapper intact. Otherwise Form 3520/3520-A reporting and current-year taxation of internal growth apply.

5. CPP / OAS & Totalization

Under the Canada–US Totalization Agreement (1984), periods of US Social Security and CPP coverage can be combined to qualify for benefits. CPP and OAS received by a US resident are taxable only in the US under treaty Article XVIII(5), but Canada may impose the OAS recovery tax via Form T1136.

6. Canadian real estate after departure

Rental income: Part XIII 25% gross withholding by default; Section 216 electionallows net-rental taxation at graduated rates. On sale: Section 116 Certificate of Compliance (T2062) required before closing or buyer withholds 25% of gross proceeds.

7. CCPC shares — the CFC trap

The day you become a US person, your CCPC becomes a Controlled Foreign Corporation for US purposes. Subpart F and GILTI taxation can apply to undistributed earnings. The Section 962 election mitigates by allowing corporate-level rates plus deemed-paid foreign tax credits. Canadian departure tax under s. 128.1(4) deems the shares disposed at FMV, creating a US-side basis step-up — but timing differences create double-taxation risk if not coordinated.

8. Snowbirds — the 183-day weighted formula

Days in current year + ⅓ of prior-year days + ⅙ of two-years-prior days. If the total is ≥183 and current-year days ≥31, SPT is met. Filing Form 8840 (Closer Connection) by June 15 each year preserves Canadian-only residency if you have a permanent home and stronger ties in Canada and stayed <183 days in the current year.

Worked example — Ontario CCPC owner moving to California

Persona: Priya, age 48, sole shareholder of an Ontario professional corporation; CCPC FMV $2.5M, ACB $50k. Departure FMV crystallises a $2.45M gain — 50% inclusion = $1.225M taxable, ON top marginal ≈ 53.53% → roughly $655k federal/provincial tax. She files T1243/T1244, posts security on the deferred portion (T1244), and crystallises the $1.25M LCGE pre-departure where QSBC tests are met, reducing the bill by roughly $335k. Post-move the CCPC is a CFC; she elects under §962 and coordinates US/Canadian credits annually.