Your Child Was Born in Canada to a US Citizen Parent: Tax Obligations

If one parent is a US citizen (or in some cases a US national or long-term resident), a child born in Canada is a US citizen at birth under INA 301, regardless of where the birth takes place. The child may also be a Canadian citizen by birth (since Canada grants citizenship by birth on Canadian soil under the Citizenship Act). The result is a dual citizen from day one, with tax obligations in both countries.

What makes the child a US citizen?

Under INA 301(g), a child born outside the US to one US citizen parent and one non-US-citizen parent acquires US citizenship at birth if the US citizen parent was physically present in the US for at least 5 years before the child’s birth, at least 2 of which were after age 14.

• If both parents are US citizens, the requirement is looser: the US citizen parent needs only 1 year of prior US residence.
• The parent should obtain a Consular Report of Birth Abroad (CRBA) and a US Social Security Number (SSN) for the child. The SSN is required for US tax filings, including the parent’s return (to claim the child as a dependent and the Child Tax Credit).

When does the child need to file a US return?

A US citizen child must file a US income tax return when their income exceeds the filing thresholds:

• Unearned income (interest, dividends, capital gains): over $1,300 (2024).
• Earned income (wages, self-employment): over $14,600 (2024).
• Both: if unearned income exceeds $1,300, or total income exceeds the larger of $1,300 or earned income plus $450.

For a young child in Canada, the most common trigger is investment income. If the child has a bank account earning interest, or if a grandparent gifts investments that generate dividends, the unearned income threshold is low ($1,300). The parent can elect to include the child’s income on the parent’s return (Form 8814) if the income is only interest and dividends totaling less than $12,500.

The kiddie tax rules apply to a child’s unearned income above $2,600 (2024): it is taxed at the parent’s marginal rate.

What about the FBAR?

The FBAR obligation applies to all US persons, including minors. If the child has a Canadian bank account, a RESP, or any other financial account outside the US, and the aggregate value of all foreign accounts exceeds $10,000 at any point during the year, the FBAR must be filed.

Common triggers for children:

• Bank account in the child’s name. Even a small savings account with $500 counts toward the aggregate. If the parent has $9,501 in their own Canadian accounts, the parent’s FBAR is triggered, and the child’s $500 account is reported on the parent’s FBAR (if the parent has signature authority). The child also has their own FBAR obligation if the child’s own accounts (including accounts where the child has a financial interest) exceed $10,000.
• RESP. A Registered Education Savings Plan is a Canadian registered account. The US does not recognize the RESP’s tax-deferred status. The RESP is a foreign account for FBAR purposes and may be a foreign trust for Form 3520 purposes.
• In-trust-for (ITF) account. An ITF account set up by a grandparent for the child is a foreign account in which the child has a beneficial interest.

The parent files the FBAR on behalf of the child (the child cannot sign). The filing is done electronically through BSA E-Filing.

What about the RESP and Form 3520?

A RESP with a US citizen beneficiary creates a triple reporting burden:

• FBAR. The RESP is a foreign financial account, reportable if the aggregate threshold is met.
• Form 8938. If the child’s foreign financial assets exceed the filing threshold ($50,000 for a single filer in the US, $200,000 if abroad), the RESP is reported. For a child living in Canada, the “abroad” thresholds apply.
• Form 3520/3520-A. The RESP may be treated as a foreign trust. If so, the US beneficiary (the child, through the parent) must file Form 3520 (Annual Return to Report Transactions with Foreign Trusts) and the RESP provider is technically required to file Form 3520-A (though Canadian institutions never do, so the parent typically files it). The Form 3520 penalty abatement rules apply if the forms are late.
• The RESP reporting burden is one of the main reasons cross-border families with US citizen children avoid RESPs entirely and use other savings vehicles (a US 529 plan, a taxable brokerage account, or simply keeping the money in the parent’s account).

What about the Canada Child Benefit?

The Canada Child Benefit (CCB) is paid to Canadian-resident families with children under 18. The child’s US citizenship does not affect CCB eligibility (CCB is based on the parent’s Canadian residency and income, not the child’s citizenship). The CCB is not US-taxable income.

What should I do next?

Get the child’s US SSN (through the US consulate or embassy, along with the CRBA). Determine whether the child has US filing obligations (income above the thresholds, or foreign accounts above $10,000 for FBAR). If the family has a RESP for the child, assess the Form 3520 reporting burden. Consider whether a RESP is worth the compliance cost, or whether a 529 plan or taxable account is simpler.

• RESP cross-border planning, the US tax treatment of RESPs
• FBAR vs Form 8938, the foreign account reporting
• Kiddie tax rules, the taxation of a child’s unearned income
• Canada Child Benefit on a US return, the CCB’s US treatment
• Dual citizen filing obligations, the broader dual-citizen picture

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