Canadian RRSP and US Tax: How the IRS Treats Your RRSP

If you’re a US citizen or resident with a Canadian RRSP, the IRS generally doesn’t tax the growth inside it until money comes out. Rev. Proc. 2014-55 treats most RRSP holders as having made the treaty election to defer, with nothing to file, and it ended Form 8891 and the Form 3520 reporting for these plans. Withdrawals are US income in the year you receive them, with a credit for Canadian tax. The account still goes on your FBAR and, above the thresholds, Form 8938. This page is part of our cross-border retirement guides.

How does the US tax a Canadian RRSP?

Without the treaty, the US would tax the income building up inside the plan every year. Rev. Proc. 2014-55 says a US citizen or resident who is a beneficiary of a Canadian retirement plan is generally subject to current US tax on income accrued in the plan, even though Canada doesn’t tax it until it’s paid out. Treaty Article XVIII(7) fixes that mismatch with an election to defer.

Article XVIII(7) of the Canada-US treaty, as amended in 2007, lets a citizen or resident of one country who is a beneficiary of a pension plan in the other “elect to defer taxation” on income accrued in the plan “until such time as and to the extent that a distribution is made from the plan or any plan substituted therefor.” A RRIF that replaces your RRSP is covered by that last phrase.

Who you are	What Canada taxes	What the US taxes	US reporting
US resident, RRSP left in Canada	25% Part XIII on each withdrawal; 15% on RRIF payments within the periodic limit	Withdrawals as income; growth deferred if you’re an eligible individual	FBAR; Form 8938 above thresholds; no 8891 or 3520
US citizen living in Canada	Withdrawals at resident graduated rates; withholding is a prepayment	Withdrawals as income; growth deferred if eligible	Same
US person who once reported the plan’s growth	As above	Growth stays currently taxable unless the IRS consents to an election	Same

What is the RRSP treaty election, and is it automatic?

For most people, yes. Rev. Proc. 2014-55 treats an “eligible individual” as having made the Article XVIII(7) election in the first year they could, so they don’t make it “for that first year or for any subsequent years either on Form 8891” or by statement. The election applies plan by plan, and it applies whether or not you lived in Canada when you contributed.

An eligible individual is a beneficiary who:

• is or was a US citizen or resident while a beneficiary of the plan;
• has filed every US income tax return they were required to file;
• has never reported the plan’s undistributed earnings as gross income; and
• has reported any distributions as if the election were in place.

Section 4.04 says someone who reported the plan’s undistributed income on a US return isn’t eligible, stays currently taxable on it, and must seek the Commissioner’s consent to elect. The procedure also says the election can’t be revoked without consent. It made Form 8891 “obsolete as of December 31, 2014,” and section 9 makes the procedure effective for taxable years beginning on or after January 1, 1996. Our page on Form 8891 covers old returns that carried it.

What are the RRSP withdrawal rules for non-residents?

Canada charges a non-resident 25% of each RRSP payment under ITA 212(1)(l), whatever the amount, and CRA’s withdrawal rates page confirms that rate “unless reduced by a treaty.” An RRSP lump sum isn’t reduced: the treaty’s 15% covers only periodic pension payments, and Canada’s definition excludes RRSP payments before maturity.

• RRIF payments can get 15%. Under Article XVIII(2)(a) and the Income Tax Conventions Interpretation Act, a RRIF payment to a US resident is periodic until the year’s payments pass the greater of twice the minimum and 10% of the January 1 value. The RRIF conversion guide has the minimum table.
• The 25% is usually final. CRA’s non-resident guide T4058 says the non-resident tax withheld is, in general, your final tax obligation to Canada on that income. A section 217 return, due June 30 of the following year, is the optional exception.
• Leaving didn’t tax the plan. An RRSP is an “excluded right or interest” under ITA 128.1(10), so the departure-year deemed sale skips it.

Our RRSP for non-residents page covers contributions and conversion after you leave, and the lump sum vs RRIF comparison counts both countries’ tax on each route.

How much of an RRSP withdrawal is taxable in the US?

Generally all of it, though basis is an open question in some cases. Rev. Proc. 2014-55, section 6, says distributions “must be included in gross income” under section 72, “subject to any applicable provision of the Convention.” IRC 72 lets you recover your “investment in the contract,” defined as the premiums or other consideration paid.

• For a US resident. Article XVIII(1), as amended by protocol, exempts in the US only the part of a pension that “would be excluded from taxable income” in Canada if you lived there. Canada includes the whole withdrawal under ITA 146(8), so nothing is exempt on that ground. The procedure doesn’t say whether contributions you deducted in Canada before becoming a US resident count as basis.
• For a US citizen in Canada. The procedure’s own example is a US citizen living in Canada who set up an RRSP in 2004, and it says that when he receives distributions, “the entire amount of each distribution will be subject to U.S. Federal income tax.” It doesn’t explain how that fits with section 72 basis.
• Our read. Don’t claim basis without records of what you contributed and when, and treat it as a position to document, not a default. The sources we fetched don’t settle it.

Do US citizens in Canada pay US tax on RRSP withdrawals?

They report the withdrawal on the US return, and the Canadian tax on it becomes a credit against the US tax, up to a limit. Canada taxes the withdrawal as income at resident rates, with 10%, 20% or 30% withheld outside Quebec, depending on the amount, as a prepayment. IRS Publication 514 then caps the US credit at your US tax times foreign taxable income over total taxable income.

• No US deduction for an individual RRSP. Treaty Article XVIII(13) lets a US citizen resident in Canada deduct contributions to a “qualifying retirement plan” tied to Canadian employment, but paragraph 15(b) excludes “an individual arrangement in respect of which the individual’s employer has no involvement.” Rev. Proc. 2014-55 also says its election reaches only income accrued in the plan “and not to any contributions.” Our RRSP contributions page covers group plans.
• Home Buyers’ Plan withdrawals. CRA puts the HBP limit at $60,000, and ITA 146(8) leaves these “excluded withdrawals” out of Canadian income. Rev. Proc. 2014-55 names no exception for them, so in our read the US side treats an HBP withdrawal as a distribution, with no Canadian tax on it to credit.
• Room is still room. CRA’s limits table puts the RRSP dollar limit at $33,810 for 2026 ($32,490 for 2025, $35,390 for 2027). That limit is a Canadian figure only.

Does an RRSP need FBAR, Form 8938 or Form 3520?

FBAR and possibly Form 8938, but not Form 3520. Rev. Proc. 2014-55, section 5.01, says beneficiaries and annuitants of a Canadian retirement plan “are not required to report” contributions, distributions or ownership under section 6048 (Form 3520), and custodians don’t file Form 3520-A. It says it doesn’t affect any obligation under section 6038D (Form 8938) or the FBAR.

The IRS comparison of the two forms sets these thresholds:

• FBAR: the aggregate value of your foreign financial accounts exceeds $10,000 at any time during the calendar year.
• Form 8938, living in the US: unmarried, more than $50,000 on the last day of the year or $75,000 at any time; married filing jointly, more than $100,000 or $150,000.
• Form 8938, living outside the US: unmarried, more than $200,000 on the last day of the year or $300,000 at any time; married filing jointly, more than $400,000 or $600,000.

The Form 8938 vs FBAR guide explains filing both. A TFSA is a separate question outside Rev. Proc. 2014-55: see whether a TFSA is a foreign trust.

What happens to an RRSP at 71?

It has to mature by the end of the year you turn 71, wherever you live. ITA 146(2)(b.4) bars maturity after that, and CRA’s guide T4040 says that on maturity the funds must be withdrawn, transferred to a RRIF, or used to buy an annuity. A RRIF is one choice, not a requirement.

• T4040 says there are no immediate tax implications when amounts go to a RRIF or buy an annuity, and that otherwise the value of all the property in the plan is included in your income.
• A RRIF pays a yearly minimum starting the year after you set it up.
• There’s no tax-free route from an RRSP into a US IRA in the sources we checked: the 212(1)(l) transfer exceptions name only Canadian plans and annuities, so moving the money means a withdrawal in Canada first and a distribution on the US return.

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