Should you withdraw your Canadian Tax-Free Savings Accounts (TFSA) when moving down to the United States?
“A Canadian Tax-Free Savings Account (TFSA) is an account that provides tax benefits for saving in Canada. Investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. Unlike contributions to Registered Retirement Savings Plans, contributions to a TFSA are not deductible for income tax purposes.
Consult with your Canadian financial institution on your available TFSA options prior to your move down to the United States. “The Border Guide” by Robert Keats is a useful starting resource – see article “U.S.-Canada Cross-Border Resources”.
TFSAs are not recognized in the States. Canadian Registered Retirement Savings (RRSPs) are, however, recognized as registered retirement accounts in the U.S., which is why you can retain your RRSPs in a Canadian financial institution while living in the U.S. without incurring financial impacts. As such, it may be beneficial to withdraw your TFSAs and deposit them to your existing Canadian chequing or savings bank account.
As always, maintain good records on when these TFSA funds are withdrawn, the closing value of each of your TFSAs and date the TFSA was closed. You will need this for your upcoming U.S. tax filing and U.S. Department of Treasury foreign bank account declaration forms (e.g. TDF 90.22-1).
Ensure that the bank has your new mailing address so closing TFSA statements can be mailed to you accordingly.
Please conduct your own thorough research as every situation is unique. The content mentioned is only a piece of our experience, and should only be used as a tidbit of information, not for financial advice.
A global wealth advisor may also be able to outline your financial options, and clarify handling complicated wealth arrangements while living abroad. Seeking the services of a cross-border tax accountant may be helpful in completing your Canadian and U.S. income taxes, and ensuring the necessary foreign income declaration forms are completed in a timely manner while living abroad.
Best of luck!