Each year I help over 500 clients file their Canadian and US tax returns as well as plan for both their Canadian and US investment accounts. I also regularly help new US clients plan for their move to Canada.
I found information online when I was doing my research. My wife and I are in the process of planning our move from San Diego to Vancouver Island some time later this year. We won’t need help with taxes and investment planning until next year but I thought I would reach out in case there’s something we need to plan for before the end of the year.
Our US CPA suggested I reach out to someone familiar with both US and Canadian taxes and you look like the right guy to answer our questions. I would be willing to pay for a consultation if that’s the way you can help answer our questions.
Like I mentioned we’ll be moving to Victoria at the end of the year. We are retired, but our daughter is going to UVic and will be living with us while she attends University.
We have an offer on a house in Victoria that we hope will close shortly.
To flush out our situation in more detail
- Both my wife are dual citizens that have been living in the US for over 25 years
- We moved down here for work 25 years ago and are now returning to retire
- Other than the new house (yet to close), the only asset we have in Canada is 2 small RRSPs
- Other than our Canadian assets we have the following assets: regular investment accounts with fidelity including traditional IRAs and ROTH IRAs. We also have a house in San Diego that will be sold before we move up to Canada. My wife will be receiving a fairly large inheritance (over $2,000,000) in less than 10 years.
- Our retirement income will consist of investment income, my company pension and some consulting income if I can find work up in Victoria
Considering the information I’ve just outlined is there anything we need to plan for before we make the move up to Victoria?
I would be happy to give you a call or schedule a meeting to discuss.
Please let me know what the next steps are.
Thanks for the email and congrats on your retirement plans. We should certainly chat on the phone to properly plan out your transition plan to the Island, but I’ll do my best to outline some of the tax and financial planning issues based on your your information below:
First, you won’t need to file your first Canadian tax return until early next year. You’ll also be filing a US income tax returns at the same time. You can read more about American’s filing returns in Canada here.
You’ll also need to file FBAR forms with the treasury department for any Canadian bank and investment accounts you have while a resident of Canada. You mentioned RRSP accounts above. If these accounts were over $10,000 you would have been required to file FBAR forms in previous years. We can chat about this later in more detail.
If the US house sells before moving to Canada you won’t have any Canadian tax consequences on the sale and as long as it was your principal residence, you’ve been living in the house for 2 out of the last 5 years and the gain on the house is less than $500,000, then you shouldn’t have any US taxes payable on the sale.
As long as you don’t rent the Canadian house before you become a resident you shouldn’t need to file anything in Canada before moving.
Your US investments will likely take most of the planning. We’ll want to talk about this in much more detail, however in most cases we’ll want to plan and review the following:
- We will want to review any possible conversions from the IRA to ROTH IRAs. In cases where income tax rates are relatively low in the year before retiring to Canada there may be some tax saving available in converting the IRS to a ROTH.
- The investment accounts will need to be transferred up to Canada as Fidelity will not be able to hold the investments for you as a resident of Canada. We can help with the transfer of the investments up to Canada
- Before the transfer we’ll want to assess any accrued gain/loss inherit in the investment accounts. Canada will not tax you on accrued gains earned before you become a resident of Canada, however in cases where some of the positions are in a loss position we may want to realized losses to ensure future Canadian taxes are not paid on these positions.
We should also be able to take advantage of pension income splitting on your company pension. To the extent your wife’s income is less than yours (which seems to be the case from the information below), you’ll be able to income split.
We’ll also want to review your wife’s future inheritance. Depending on where the inheritance is coming from and in what form it comes there could be some efficiencies in planning.
Although these rules are very new, the US just announced possible tax free withdrawals from registered plans. There may be an opportunity to pull some amounts from the registered accounts to try and save on future Canadian taxes.
Definitely lots to talk about, but hopefully I’ve given you some good information to chew on.
Please let me know when you’re available and we can chat about a plan.
Phil Hogan, CPA, CA, CPA(CO)