Canadian RRSP and US Tax: How the US Treats Your Canadian Retirement Account

The RRSP is Canada’s primary individual retirement savings vehicle. Contributions are deductible, growth is tax-deferred, and withdrawals are taxed as income. For someone who only files Canadian taxes, it works like a traditional IRA. But a US person (citizen, green card holder, or resident) who holds an RRSP faces a more complicated situation, because the US does not automatically recognize the tax-deferred status of a foreign retirement plan. Without a treaty election, the US can tax the annual investment income inside the RRSP as it accrues, even though the Canadian has not withdrawn a dollar.

How does Canada tax the RRSP?

In Canada, the RRSP works as a tax-deferred retirement account:

• Contributions are deductible against income, up to the annual limit (18% of prior-year earned income, capped at $32,490 for 2025). Unused contribution room carries forward indefinitely.
• Investment income inside the RRSP (dividends, interest, capital gains) is not taxed while it remains in the account.
• Withdrawals are included in income and taxed at the taxpayer’s marginal rate. Withdrawals before retirement are subject to withholding tax (10% on withdrawals up to $5,000, 20% on $5,001 to $15,000, 30% on amounts over $15,000).

At age 71, the RRSP must be converted to a RRIF (Registered Retirement Income Fund) or used to purchase an annuity. Minimum RRIF withdrawals are required each year.

How does the US treat RRSP contributions?

A US person who makes RRSP contributions while filing a US return generally cannot deduct those contributions on the US return. The US deduction for retirement savings goes through the IRA/401(k) system, not through foreign plans. The treaty preserves deferral on income earned inside the RRSP, but it does not create a US deduction for contributions.

This means a US citizen living in Canada who contributes $20,000 to their RRSP gets a Canadian tax deduction but no corresponding US deduction. If the Canadian marginal rate is 40% and the US effective rate after foreign tax credits is 5%, the net benefit of the contribution is still positive because the Canadian deduction is worth more than the US tax cost. But the taxpayer must understand that the contribution is not “free” on the US side.

There is an exception: a US citizen or resident who was already a participant in the RRSP before becoming a US person (for example, a Canadian who acquired a green card) and who has accumulated contribution room may continue to contribute and claim the Canadian deduction, with the treaty preserving the deferral on income earned inside the plan. The contribution itself is still not deductible on the US return.

What is the treaty election for RRSP deferral?

Article XVIII(7) of the US-Canada treaty allows a US person to elect to defer US tax on income accruing inside an RRSP, RRIF, or DPSP. Without this election, the US could tax the annual investment income (dividends, interest, capital gains realized inside the RRSP) as it accrues, because the US does not recognize the RRSP as a tax-exempt retirement vehicle.

Before 2015, the taxpayer made this election by filing Form 8891 (US Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans) with each year’s US return. Failure to file Form 8891 meant the election was not in effect, and the income inside the RRSP was currently taxable on the US return.

Revenue Procedure 2014-55 changed the rules effective for tax years beginning after December 31, 2014. The IRS now treats eligible individuals as having made the election automatically, without any annual filing. Form 8891 was eliminated.

What reporting is required for an RRSP on US returns?

Even with the automatic deferral election, the RRSP must be reported in several places:

FBAR (FinCEN 114): The RRSP is a foreign financial account. If the total value of all foreign financial accounts (including the RRSP) exceeds $10,000 at any point during the year, the taxpayer must file an FBAR. The RRSP balance is reported on the FBAR with the account type “other” and a description of “RRSP.”

Form 8938 (FATCA): If the RRSP balance, combined with all other specified foreign financial assets, exceeds the filing threshold ($200,000 at year-end or $300,000 at any point during the year, for taxpayers living abroad), the RRSP is reported on Form 8938. The asset category is “other financial account.”

Form 3520/3520-A: The IRS has historically taken the position that an RRSP is a “foreign trust” for US tax purposes. If so, the US beneficiary would need to file Form 3520 (Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and the RRSP trustee would need to file Form 3520-A (Annual Information Return of Foreign Trust With a US Owner). In practice, Revenue Procedure 2014-55 and the automatic deferral election have reduced compliance burdens for RRSP holders, and most practitioners treat the RRSP/FBAR/8938 reporting as sufficient. But the IRS has not formally withdrawn its position that RRSPs are foreign trusts, and in some circumstances (large balances, IRS audit), Forms 3520/3520-A may be requested.

What happens when you withdraw from the RRSP?

When a US person withdraws from the RRSP, both countries tax the withdrawal:

Canada: The withdrawal is included in income and taxed at the taxpayer’s marginal rate. The financial institution withholds tax at source (10%/20%/30% depending on the amount, for Canadian residents; 25% for non-residents, reduced to 15% by the treaty for periodic payments from a RRIF).

US: The withdrawal is included in income and taxed at the taxpayer’s marginal rate. The taxpayer claims a foreign tax credit on the US return for the Canadian tax paid on the withdrawal, which reduces or eliminates the US tax.

For a US citizen living in Canada, the Canadian tax rate is usually higher than the US rate, so the foreign tax credit fully absorbs the US tax, and no additional US tax is owed. For a US citizen who has moved back to the US and is withdrawing from a Canadian RRSP as a non-resident of Canada, the Canadian withholding rate is 25% (reduced to 15% by the treaty for periodic RRIF payments), and the US taxes the withdrawal at the applicable marginal rate. The foreign tax credit for the Canadian withholding reduces the US tax.

How is an RRSP treated when moving to the US?

A Canadian who moves to the US and becomes a US person (through a green card or substantial presence) keeps the RRSP intact. There is no requirement to close the RRSP or transfer it to a US retirement account. The RRSP continues to grow tax-deferred in Canada, and the treaty election (now automatic) preserves the deferral on the US side.

However, the Canadian should be aware of a few issues:

1. No new contributions after departure. Once the taxpayer is no longer a Canadian resident (and has no Canadian earned income), they have no RRSP contribution room. Contributions stop.

2. RRSP to RRIF conversion at 71. The taxpayer must convert the RRSP to a RRIF at age 71, even if they are no longer a Canadian resident. Minimum withdrawals from the RRIF are subject to Canadian withholding tax (25% for non-residents, reduced to 15% by the treaty for periodic payments up to a threshold).

3. US reporting continues. The FBAR and Form 8938 requirements continue as long as the account exists and the taxpayer is a US person.

4. No rollover to a US IRA. There is no mechanism to transfer an RRSP to a US IRA or 401(k) on a tax-free basis. A withdrawal from the RRSP to fund a US retirement account is a taxable event in both countries.

What about the TFSA?

The Tax-Free Savings Account (TFSA) does not receive the same treaty protection as the RRSP. The US does not recognize the TFSA as a retirement plan, and the treaty does not provide a deferral election for TFSA income.

For a US person, the investment income inside a TFSA is taxable annually on the US return (dividends, interest, and capital gains are reported as they accrue). The TFSA may also be treated as a foreign trust, potentially requiring Forms 3520/3520-A. This makes the TFSA a poor choice for US persons, since the US taxation eliminates the tax-free benefit that Canada provides.

The practical advice: US persons in Canada should maximize RRSP contributions (which receive treaty protection) before contributing to a TFSA. If a US citizen or green card holder has a TFSA, they should consider closing it and moving the funds to an RRSP or non-registered account to simplify US reporting.

What about the Home Buyers’ Plan or LLP?

The Home Buyers’ Plan allows a Canadian resident to withdraw up to $60,000 from their RRSP tax-free to buy a first home, with repayment over 15 years. The Lifelong Learning Plan allows withdrawal of up to $20,000 ($10,000/year) for full-time education.

For a US person, these withdrawals are treated as RRSP withdrawals on the US return. The US does not recognize the HBP or LLP exemption. The withdrawal is included in US income, and a foreign tax credit is available for any Canadian tax paid (though if Canada treats the withdrawal as non-taxable under HBP/LLP, there is no Canadian tax to credit). This creates a US tax cost that does not exist for a non-US Canadian.

Related guides

• RRSP Contributions for a US Citizen Living in Canada
• Do I Still File Form 8891 for My RRSP?
• RRSP for Non-Residents After Leaving Canada
• RRSP Lump Sum vs Periodic Withdrawals After Moving to the US
• Is a TFSA a Foreign Trust? Form 3520 Explained
• RRSP vs 401(k): Cross-Border Comparison
• Spousal RRSP and US Citizen Cross-Border Tax
• FBAR Filing Requirements

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.