Retirement in Canada for US Citizens: US Expat Tax Advice.

Retirement in Canada for US Citizens: US Expat Tax Advice.
Updated on April 26, 2024

Canada is just a hop, skip, and a jump away from northern parts of the US, and a popular destination for Americans moving abroad. Find out how US expat taxes in Canada apply to Canadian retirement programs.

Canadian Retirement Programs

Canada has a public retirement system comprised of three parts: the Canada Pension Plan (CPP), Old Age Security (OAS), and the Quebec Pension Plan (QPP). The QPP is a plan equivalent to CPP for residents of Quebec province. Canadian law also provides for private tax-advantaged employer-sponsored plans and individual plans.

Eligibility Requirements for CPP Benefits

The CPP Board functions as a sovereign wealth fund, managing the contributions of all employed Canadians over the age of 18. Employment in Canada brings with it mandatory wage-based employee contributions to either CPP or QPP. At age 65, participants can begin drawing benefits based on earnings on which contributions were made.

To be eligible for CPP benefits, you must meet the following criteria:

  • Be over age 59
  • Have worked in Canada and made at least one valid contribution to CPP
  • Have filed an application for the benefits

Eligibility Requirements for OAS Benefits

Participation in and distributions from the OAS pension program are not determined by employment history. There are no direct contributions made by participants or their employers. Eligibility requirements are as follows:

  • Age 65 or older
  • Canadian citizen or legal resident
  • Have resided in Canada:
    • If current resident in Canada, for at least ten years since age 18
    • If residing outside Canada, for at least 20 years since age 18. You must have been a Canadian citizen or legal resident of Canada on the day before you left Canada.

OAS benefits are based on how long you have resided in Canada after age 18.

Tax Deferred Plans in Canada

Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Funds (RRIF) are private tax-deferred plans that allow contributions and income accumulation to go untaxed until withdrawn. The IRS recognizes the tax-deferred treatment of these plans up to the limits of similar US plans.

The US-Canada Income Tax Treaty’s Implications for US Expat Taxes in Canada

Under the US-Canada income tax treaty, pension distributions are generally taxable by the resident country and, at a maximum rate of 15%, by the country in which the pension distribution arose. A foreign tax credit may be claimed on the US return for Canadian taxes imposed on Canadian-sourced pension benefits. Both CPP and OAS benefits are only taxable in Canada.

Have Specific Questions about US Expat Taxes in Canada?

Greenback accountants specialize in expat taxes, and whether your questions are about how to file, or how to plan for a tax-savvy retirement, you can be sure you’re getting the best information! Contact Greenback today.

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