Should I Retire in Canada or the US? A Tax Comparison for Dual Citizens

For a dual citizen or permanent resident who has the option of retiring in either Canada or the US, the tax comparison is not a single number. It depends on your income sources (CPP, OAS, Social Security, RRSP/RRIF, 401(k)/IRA, non-registered investments, rental income), your province and state, your family structure, your health situation, and your estate. The direction is generally that the US produces lower income tax at most income levels, but Canada produces lower all-in costs when healthcare is included, and the gap varies dramatically depending on where you live in each country.

Income tax comparison at retirement income levels

Retirement income is typically a mix of pension income (CPP, OAS, Social Security), registered account withdrawals (RRSP/RRIF, 401(k)/IRA), and investment income (dividends, interest, capital gains). The tax treatment of each differs between countries.

Pension income:

• CPP/OAS received in Canada: taxable in Canada at your marginal rate. OAS subject to clawback if net income exceeds $90,997 (2025).
• CPP/OAS received in the US: taxable only in the US at 85% inclusion. No OAS clawback.
• US Social Security received in Canada: taxable only in Canada at 85% inclusion (15% deduction under ITA 110(1)(f)(i)).
• US Social Security received in the US: taxable in the US at up to 85% inclusion, depending on combined income.

RRSP/RRIF withdrawals:

• In Canada: fully taxable as income.
• In the US (if you maintain the RRSP/RRIF as a non-resident): Canada withholds Part XIII tax (25% default, 15% treaty rate on periodic payments). The US includes the withdrawal in income and allows an FTC for the Canadian withholding.

401(k)/IRA withdrawals:

• In the US: fully taxable as ordinary income (traditional) or tax-free (Roth, if qualified).
• In Canada (if you move to Canada): the US withholds (treaty-reduced rate). Canada includes the withdrawal in income with an FTC for US withholding.

Investment income (non-registered):

• The US taxes long-term capital gains at preferential rates (0%, 15%, 20%). Canada includes 50% of capital gains in income at your marginal rate.
• Eligible Canadian dividends get the dividend tax credit in Canada, reducing the effective rate. The US taxes dividends at qualified dividend rates (same as LTCG rates) or ordinary rates.
• The NIIT (3.8% on net investment income above the MAGI threshold) applies to US citizens/residents with investment income. No equivalent in Canada.

Worked comparison: $100,000 retirement income

Scenario: $100,000 total retirement income (combined CPP $15,000 + OAS $9,000 + RRIF $50,000 + Social Security $14,000 + investment income $12,000). Single filer.

Retiring in Ontario:

• CPP ($15,000) + OAS ($9,000): fully taxable in Canada
• RRIF ($50,000): fully taxable
• US Social Security ($14,000): 85% = $11,900 included (after 15% deduction)
• Investment income ($12,000): taxable (mix of capital gains at 50% inclusion and dividends with dividend tax credit)
• Total Canadian taxable income: approximately $95,000 (after adjustments)
• Federal + Ontario tax: approximately $17,000 to $19,000
• OAS clawback: net income (~$95,000) is above $90,997 threshold. Clawback: 15% of excess = approximately $600
• Healthcare: covered by OHIP, no premium
• All-in: approximately $18,000 to $20,000

Retiring in Florida:

• US Social Security ($14,000): 85% = $11,900 included in US income
• CPP ($15,000) + OAS ($9,000): 85% = $20,400 included (treaty Article XVIII(5))
• RRIF ($50,000): Canada withholds 15% ($7,500 treaty rate). US includes $50,000, FTC for $7,500
• Investment income ($12,000): taxable at LTCG/qualified dividend rates where applicable
• Total US taxable income: approximately $94,300 (after standard deduction ~$15,700 and adjustments)
• Federal US tax: approximately $13,500 to $15,000
• State tax: $0 (Florida)
• OAS clawback: $0 (treaty exemption)
• RRIF Canadian withholding: $7,500 (credited against US tax via FTC, not an additional cost)
• Medicare premiums: approximately $2,100/year (Part B, standard premium). Part D (drug coverage): $400 to $1,200/year. Medigap or Medicare Advantage: $1,500 to $4,000/year
• All-in: approximately $17,500 to $22,000

The numbers are close. Florida has lower income tax (no state tax) but higher healthcare costs. Ontario has higher income tax but no separate healthcare cost. The OAS clawback ($600 in this example) adds to the Ontario cost but is small at this income level. At higher incomes ($150,000+), the OAS clawback grows significantly, and the Florida tax advantage widens because the clawback exemption is worth $3,000 to $8,000+ annually.

The OAS clawback factor

The OAS clawback is the single clearest tax advantage of retiring in the US vs Canada for higher-income retirees. In Canada, OAS is clawed back at 15 cents per dollar of net income above $90,997 (2025), reaching full repayment at approximately $148,000. In the US, the treaty exemption means zero clawback regardless of income.

For a retiree with $130,000 of net income:

• In Canada: OAS clawback = 15% of ($130,000 - $90,997) = approximately $5,850
• In the US: OAS clawback = $0

Over a 20-year retirement, the clawback difference alone is $117,000. This is a real, calculable benefit of US retirement for anyone above the clawback threshold.

Healthcare

This is the factor that complicates every tax comparison.

Canada: universal coverage through the provincial health system. No premiums in most provinces (BC has premiums for higher earners, but they were eliminated for most residents). No deductibles or copays for medically necessary services. Prescription drug coverage varies by province (some have pharmacare programs, others require private insurance or out-of-pocket payment). Dental and vision are generally not covered.

US (age 65+): Medicare Part A (hospital) is premium-free if you have 40 quarters of US work. Medicare Part B (medical) has a standard monthly premium ($185/month in 2025, higher for higher incomes through IRMAA surcharges). Part D (prescription drugs) has a separate premium. Medigap (supplemental) or Medicare Advantage plans cover the gaps. Total annual cost: $3,000 to $8,000+ depending on coverage choices and income level.

US (before age 65): if you retire before 65, you need private insurance or Marketplace coverage. ACA Marketplace premiums depend on income and state. At moderate retirement income ($50,000 to $100,000), premiums can be $5,000 to $15,000+ per year for a couple. This is a significant expense that Canadian retirees do not face.

For retirees under 65, the healthcare cost gap strongly favors Canada. For retirees 65+ with Medicare, the gap narrows but still exists (Medicare has premiums and coverage gaps that Canadian healthcare does not).

Estate tax

Canada has no estate tax. Canada has a deemed disposition at death (capital gains tax on unrealized gains), but the spousal rollover defers this when assets pass to a surviving spouse.

The US has an estate tax with a $13.99 million exemption (2025). Most retirees are below the exemption. But if the surviving spouse is not a US citizen, the unlimited marital deduction does not apply, and a QDOT may be needed.

For a Canadian citizen retiring in the US without US citizenship, the estate tax exposure on US-situs assets is a planning consideration. For a dual citizen, the full exemption applies, and estate tax is generally not a concern unless the estate exceeds $13.99 million.

The non-tax factors

Tax is one input. The retirement location decision also involves:

• Proximity to family and social network: often the dominant factor
• Climate: many Canadian retirees prefer the US for winter weather
• Healthcare quality and access: Canada has universal coverage but wait times for specialists; the US has faster access but higher costs
• Cost of living: varies dramatically by city and region in both countries
• Currency: a Canadian retiree in the US with CAD income is exposed to exchange rate fluctuations
• Immigration status: a Canadian citizen can visit the US for up to 6 months per year as a visitor but cannot reside permanently without a green card or US citizenship. A dual citizen has no restriction.

What should I do next?

If you are considering retirement in either country, start with your specific income sources and amounts. Calculate the tax in your preferred Canadian province and your preferred US state. Add healthcare costs for the US side. Add the OAS clawback for the Canadian side. The comparison is specific to you, not generic.

• Canada vs US tax rates: a side-by-side comparison, the broader rate comparison
• Does the OAS clawback apply if I live in the US?, the treaty exemption
• CPP and OAS received in the US, the US tax treatment
• US Social Security received in Canada, the Canadian tax treatment
• The WEP repeal: do I get more money now?, the recent benefit increase

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