How do I get the 15% treaty rate, not 30%, withheld on my US IRA or 401(k) as a Canadian resident?

It depends on how you take the money, and on whether you’re a US citizen. For a Canadian resident who isn’t a US citizen, the treaty’s 15% cap reaches only a periodic pension payment, so a one-time lump-sum cash-out of an IRA or 401(k) stays at the 30% US default and no W-8BEN can lower it. A stream structured as a periodic pension payment can reach 15%, and you claim it by filing a W-8BEN with the custodian first. If 30% got taken on periodic money anyway, you recover the excess on a US nonresident return. If you’re a US citizen in Canada, none of that reaches you: the cap is closed and the form is a W-9.

Why is my US IRA or 401(k) distribution taxed at 30% by default?

Because 30% is the US default on this income paid to a nonresident alien, meaning someone who isn’t a US citizen. Under IRC 871(a)(1) the US taxes US-source annuities, pensions and other fixed or determinable income at 30%, and IRC 1441(a) makes your custodian withhold it at source. Publication 515 carries the same 30% as the catch-all rate. This covers pre-tax IRA and 401(k) money; Roth and after-tax basis run differently.

The rate ignores your income level, whether you draw a little or empty the account. If you’re a US citizen, neither section reaches you and the 15% cap is closed to you too.

Does any of this change if I’m a US citizen living in Canada?

Yes, and it changes the answer rather than the details. The rest of this page runs on rules that reach a nonresident alien, and a US citizen isn’t one. IRC 871(a)(1) and IRC 1441(a) both operate on a nonresident alien individual, while you are a US person under IRC 7701(a)(30)(A). The 15% cap is closed to you too, because the treaty’s saving clause leaves Article XVIII(2) out of the paragraphs it protects. And the form flips: you hand the custodian a Form W-9, not a W-8BEN.

“You are a U.S. citizen (even if you reside outside the United States) or other U.S. person (including a resident alien individual). Instead, use Form W-9 to document your status as a U.S. person.” (Instructions for Form W-8BEN, Rev. October 2021, under “Do not use Form W-8BEN if you are described below”)

The cap closes because of the saving clause. Article XXIX(2)(a), as replaced by the Fifth Protocol, says that except to the extent paragraph 3 provides, the Convention shall not affect a Contracting State’s taxation of its residents and, in the case of the United States, its citizens. Paragraph 3(a) then enumerates the obligations that survive that reservation, and on the pension side the operative list names paragraphs 1, 3, 4, 5, 6(b), 7, 8, 10 and 13 of Article XVIII. Paragraph 2, the one carrying the 15% cap, is not on it. That is a narrowing over time: the 1980 text carved out the whole of Article XVIII, and successive protocols replaced the carve-out with an enumeration.

Notice what this does not disturb. XVIII(1) and XVIII(7) are both on the surviving list, so the Roth treatment is unaffected for a citizen, and the 15% cap still binds Canada as source state on a payment out of a Canadian plan. What your US tax on the distribution actually comes to, and how the Canadian credit fits when the US tax is citizenship-based, is a different analysis than this page runs.

When does the treaty cut the rate to 15%, and when does it not?

Only when the payment is a periodic pension payment, and only if you aren’t a US citizen. Article XVIII(2)(a) of the Canada-US treaty caps the US tax at 15% of the gross amount when a Canadian resident is the beneficial owner of a periodic pension payment. IRA and 401(k) distributions sit inside the treaty term pensions, which reaches any payment under a superannuation, pension or other retirement arrangement (Article XVIII(3)(a)), so they can reach 15%. But the cap is written for periodic payments only, and that one word decides everything.

Point of comparison	Periodic pension payment	Lump-sum cash-out	Distribution before age 59½
US tax at source	15% cap under treaty XVIII(2)(a), if claimed	30% under IRC 871(a)(1) and 1441(a)	Depends on periodic versus lump sum, exactly as in the two columns at left. Separately, a possible 10% IRC 72(t) tax on your return, unless a 72(t)(2) exception applies
Does the treaty 15% cap apply	Yes, if it’s a genuine periodic payment	No; a non-periodic payment isn’t capped	Same as at left; age isn’t a treaty condition. What’s unsettled is how the cap meets the 72(t) tax
How you get the rate	If you aren’t a US citizen, file Form W-8BEN with the custodian first, and confirm the custodian applies it	You can’t; the cap doesn’t reach a non-periodic payment, so 30% stands	Same W-8BEN route on the periodic question; the 72(t) side is a separate return item
Canadian side	Included under ITA 56(1)(a)(i); credit under ITA 126, subject to the credit limit	Same inclusion and credit, same limit	Same inclusion; the extra US tax complicates the credit
If you hold US citizenship	No 15% cap; XVIII(2) isn’t in the treaty’s saving-clause carve-out, so you give the custodian a W-9, not a W-8BEN	Same, no cap, and the 30% nonresident rules don’t reach you either	Same; citizenship closes the cap regardless of age

A one-time full cash-out is the paradigm non-periodic payment. The US Treasury technical explanation is blunt that the treaty limit applies “in the case of a periodic payment” and that “other pension payments may be taxed in the State of source without limit.” So a lump sum defaults to 30%, the treaty doesn’t rescue it, and a W-8BEN can’t convert it. The mirror question runs the other way, from a Canadian plan to a US resident: drawing down an RRSP after you move to the US has its own withholding rules, and that guide takes them up.

Where’s the line between periodic and lump sum? It’s softer than you’d like. The treaty doesn’t define “periodic,” and under Article III(2) an undefined term takes its meaning from the source country’s law, where there’s no crisp US statutory test to point at. A genuinely annuitized or scheduled recurring draw reads as periodic; a full commutation doesn’t. Anything in between is fact-dependent and worth characterizing carefully before you touch the account. If what you’re weighing is moving the account rather than drawing on it, whether a 401(k) can follow you into an RRSP once you’re back in Canada is the separate decision.

How do I actually claim the 15% rate from my custodian?

If you’re not a US citizen, you hand the custodian a Form W-8BEN before the payment goes out. That’s the form a foreign beneficial owner uses; a US citizen files a W-9 instead. On a payment that qualifies as periodic, it’s how you ask for 15% instead of 30%.

What the form can’t do is change the payment’s character. Put a W-8BEN on a full cash-out and the custodian still withholds 30%, because the treaty limit never reached it. Custodians differ, so confirm the payer will apply the rate before you rely on it. The custodian reports the distribution and tax withheld on Form 1042-S, not a 1099-R.

What if my custodian withholds 30% anyway?

If you aren’t a US citizen, you recover the excess on a US nonresident return. IRS Publication 519 says you file Form 1040-NR to recover overwithheld tax and to prove you’re entitled to the treaty rate. So if the payment was genuinely periodic and 30% came off anyway, you claim the difference back.

The Form 1042-S the custodian issues documents the income and tax withheld. The recovery only works where the cap applied. No 1040-NR turns a lump sum into 15%, because the cap never reached it. A return can still be due under 59½: the 10% 72(t) tax is a return item even where the 30% withholding was right.

Does the 10% early-withdrawal penalty apply, and does the treaty stop it?

Maybe. Before age 59½, IRC 72(t) adds 10% on the includible amount, on top of the ordinary tax, unless an exception in 72(t)(2) applies. One exception covers a distribution that’s part of a series of substantially equal periodic payments made for your life or life expectancy, which is close to the structure the treaty rate wants. It carries strict conditions, so check it before you count on it.

Whether the treaty’s 15% cap absorbs the 10% or stacks on it is genuinely unsettled, and the primary sources don’t answer it either way. We route it to the assessment rather than quote a number the sources don’t settle.

How is the same distribution taxed on the Canadian side?

Canada taxes it too, because you live there. The distribution is included in your income as a superannuation or pension benefit under ITA section 56(1)(a)(i), and the US withholding is credited against your Canadian tax by the foreign tax credit under ITA section 126, subject to that credit’s limit.

That limit is why the 1040-NR recovery matters: getting US over-withholding back from the IRS beats leaning on the Canadian credit to cover it. If you’re weighing the move, what happens to your registered accounts when you cross the border is the wider question.

What should I do next?

Get the character of the payment settled before anything moves. Decide whether you’re taking a lump sum or a periodic stream, because that choice sets your rate, ahead of any paperwork. If it’s periodic and you aren’t a US citizen, file the W-8BEN with the custodian before the first payment. If 30% has already come off periodic money, the 1040-NR is your recovery path.

Map your US withholding, your Canadian bracket and the credit fit for the years you’d be drawing before you commit, and settle the pre-59½ question if it’s in play. All of it is cheaper to plan before the money moves than to unwind after.

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