US Canada Tax Treaty and Expat Taxes: What Americans Owe

Author: Randall Brody, Enrolled Agent | Licensed by the U.S. Department of the Treasury | Last Reviewed: October 2026

Yes, the United States and Canada have an income tax treaty, and for Americans in Canada it does more than most US treaties. It protects RRSPs and RRIFs from annual US tax and decides where Canada Pension Plan and Social Security benefits are taxed. It does not remove the US filing requirement. Americans in Canada still file a US return every year on worldwide income, and because Canadian tax rates are usually higher than US rates, the foreign tax credit typically eliminates the US tax on a salary. The accounts Canadians use to save tax are where Americans get caught, the TFSA and the RESP above all.

Is There a US-Canada Tax Treaty?

Yes. The United States and Canada signed their income tax treaty in 1980, and five protocols have updated it, most recently in 2007. It sets which country has the first right to tax each type of income, reduces withholding on dividends, interest, and royalties, and includes a tie breaker for anyone both countries treat as a resident.

A saving clause in Article XXIX keeps the US right to tax its citizens as if the treaty did not exist, with exceptions. The exceptions matter more in Canada than almost anywhere else, because they include the treaty’s rules on retirement accounts and social security benefits. Taking a treaty-based position on your return can require Form 8833, although the RRSP deferral no longer does.

Dividends from Canadian companies can qualify for the lower US rate on qualified dividends, because Canadian companies are eligible for treaty benefits.

Working With a US Tax Advisor in Canada

Tax Samaritan prepares US tax returns for Americans living in Canada. Randall Brody is an Enrolled Agent, a federal credential that allows representation before the IRS from any country, so there is no need for an advisor based in Canada.

The situations where advice pays for itself in Canada are specific. TFSAs and RESPs, because they are tax free in Canada and expensive on a US return. Canadian mutual funds, because of the PFIC rules. A Canadian corporation, because owning one adds Form 5471 and can create US tax on profits you have not drawn. The sale of a Canadian home. And several unfiled years, because catching up through the IRS streamlined procedures has to be done in the right order, and the wrong order creates penalties that the right one avoids.

Planning to retire in Canada? Our guide to retiring abroad covers Social Security, US retirement accounts, and state tax after you move. Guides for other countries are in our country tax guides.

How Does Canada Tax Americans Who Live There?

Canada’s tax year is the calendar year, the same as in the US. Returns are due April 30 of the following year. Self-employed individuals and their spouses have until June 15 to file, but any balance owing is still due April 30. Married couples file separate returns; Canada has no joint filing.

Canadian residents are taxed on worldwide income, and non-residents on Canadian income only. Residence depends on your ties to Canada, such as a home, a spouse or dependants, and personal and economic ties. Someone who stays in Canada for 183 days or more in a year is deemed resident for the whole year unless a tax treaty decides otherwise.

Federal rates run from 14 to 33 percent, and each province and territory adds its own income tax on top. Combined top rates are above 50 percent in several provinces, which is why Canadian tax usually produces enough foreign tax credit to cover the US tax on the same income.

US-Canada Totalization Agreement and Social Security

Yes. The United States and Canada have a totalization agreement, in force since 1984. It decides whether you pay into US Social Security or the Canada Pension Plan (or the Quebec Pension Plan) on your earnings, so you do not pay both, and it lets you combine work credits from both countries to qualify for benefits.

An American hired by a Canadian employer pays into the Canada Pension Plan, not US Social Security. An American sent to Canada by a US employer for five years or less can stay in the US system with a certificate of coverage. Self-employed Americans who live in Canada generally pay into the Canada Pension Plan only, which removes US self-employment tax on that income.

Where the benefits are taxed is a treaty question. Canada Pension Plan, Quebec Pension Plan, and Old Age Security benefits paid to a US resident are taxable only in the United States, and US Social Security paid to a Canadian resident is taxable only in Canada, which taxes 85 percent of it. This rule applies to US citizens because Article XVIII(5) is excepted from the saving clause.

RRSPs, TFSAs, and Other Canadian Accounts on Your US Return

RRSPs and RRIFs

The treaty protects RRSPs and RRIFs. Income earned inside them is not taxed in the US until you withdraw it, and since 2014 that deferral applies automatically to eligible Americans. You no longer file Form 8891 or attach an election statement, and the accounts are exempt from foreign trust reporting on Forms 3520 and 3520-A. Contributions are not deductible on your US return. Withdrawals are taxable in both countries, and the Canadian tax withheld can be credited against the US tax.

RRSPs and RRIFs still count toward the FBAR and Form 8938 thresholds. Our article on Canadian retirement plans covers RRSPs, RRIFs, and the other plans in detail.

TFSAs

A TFSA is tax free in Canada and taxable in the US. The treaty does not cover it. Interest, dividends, and gains inside a TFSA go on your US return each year, and because Canada does not tax them, there is no Canadian tax to credit against the US tax. Whether a TFSA must also be reported as a foreign trust on Forms 3520 and 3520-A is a question practitioners answer differently. For many Americans, a TFSA costs more in US tax and reporting than it saves.

RESPs

An RESP raises the same problems as a TFSA. Growth inside it is taxable in the US, the government grants paid into it may be taxable to you, and foreign trust reporting can apply. Talk to an advisor before you open one.

Canadian mutual funds and ETFs

Canadian mutual funds and ETFs are generally passive foreign investment companies (PFICs) for US purposes, reported on Form 8621 and taxed under rules designed to discourage Americans from holding them. Funds held inside an RRSP or RRIF are generally exempt from the annual PFIC reporting.

Selling your Canadian home

Canada’s principal residence exemption usually removes Canadian tax on the gain from selling your home. The US taxes it, after an exclusion of up to $250,000, or $500,000 for a married couple filing jointly, if you owned and lived in the home for two of the last five years. Exchange rate movement counts toward the gain, and paying off a Canadian dollar mortgage can create a separate taxable currency gain.

What US Taxes You Still Owe While Living in Canada

US citizens and green card holders file a US tax return on worldwide income every year, wherever they live. Americans abroad get an automatic extension of the filing deadline to June 15, and can extend to October 15 on request. Tax owed is still due April 15, and interest runs from that date.

The foreign tax credit gives a dollar-for-dollar credit for Canadian federal and provincial income tax paid on the same income, claimed on Form 1116. Because Canadian rates are high, it often eliminates the US tax on a salary entirely, unused credits carry forward for ten years, and it also covers investment income.

The foreign earned income exclusion removes up to $132,900 of foreign earnings from US tax in 2026, claimed on Form 2555, if you meet the physical presence test or the bona fide residence test. It does not reach investment income or pensions, it pushes any income above the exclusion into a higher US bracket, and an American who claims it cannot claim the refundable part of the Child Tax Credit. For most Americans in Canada the credit is the better choice.

Reporting Canadian Bank Accounts

If the combined highest balance across your foreign financial accounts exceeds $10,000 at any point during the year, you file a Foreign Bank Account Report (FBAR). The threshold is measured on all accounts together, not per account, and on the highest balance during the year rather than the year-end balance. The FBAR goes to FinCEN, not the IRS, separately from your tax return. It is due April 15 with an automatic extension to October 15.

A second, separate requirement covers foreign financial assets more broadly and is filed with your tax return on Form 8938. For taxpayers living abroad the thresholds are:

• Single or married filing separately: more than $200,000 on the last day of the year or more than $300,000 at any time during the year
• Married filing jointly: more than $400,000 on the last day of the year or more than $600,000 at any time during the year

Canadian chequing and savings accounts, RRSPs, RRIFs, TFSAs, RESPs, and investment accounts can all count toward both thresholds. A joint account with a Canadian spouse is reported at its full value.

Forms Americans in Canada Usually File

Most Americans in Canada file a predictable set of forms each year. The list below is the common case, not an exhaustive one. A Canadian corporation, a trust, or rental property can add more.

Frequently Asked Questions (FAQs)

Request A Tax Preparation Quote

Tax Samaritan prepares US tax returns for Americans in Canada, including the RRSP, TFSA, and fund reporting covered above. Request a free quote and an enrolled agent will review your situation and tell you exactly what needs to be filed, or request a free 30-minute tax consultation.