Pre-Immigration Tax Planning for Canadians
What to do before U.S. residency starts — gains, TFSA, funds, companies, trusts, and timing
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Pre-immigration tax planning is what a Canadian does before becoming a U.S. tax resident to avoid problems the U.S. system creates for Canadian assets. Once U.S. residency starts, worldwide income is U.S.-taxable, Canadian mutual funds become PFICs, a TFSA becomes taxable, and a Canadian corporation can become a controlled foreign corporation. Many fixes are cheap before the move, costly after.
On this page
The checklist
| Item | Before U.S. residency |
|---|---|
| Appreciated investments | The departure tax deems a sale in Canada; make the Article XIII(7) election to step up U.S. basis (the Article XIII(7) guide) |
| TFSA | Withdraw — tax-free in Canada, and nothing accrues in the U.S. yet (the TFSA for non-residents guide) |
| Canadian mutual funds and ETFs | Sell and buy U.S.-listed equivalents before arrival to avoid PFIC reporting (the PFIC guide) |
| RRSP and RRIF | Keep — recognized under the treaty; stop contributing (the RSP guide) |
| Canadian corporation | Decide: wind up, distribute, sell, or keep as a CFC (the moving a business guide) |
| Family trusts | Review before a beneficiary or contributor becomes a U.S. person (the Canadian trust guide) |
| RESP and FHSA | Review subscriber and holder status (the RESP guide) |
| Income timing | Bonuses, option exercises, and sales before departure are Canadian-only (sourcing rules may still apply — the stock options guide) |
| Gifts and trusts from family | A trust funded by a non-U.S. relative can be set up as a foreign grantor trust for the future U.S. person; the immigrant's own transfers to a foreign trust within five years before U.S. residency are treated as made on the residency starting date (IRC §679(a)(4)) |
The order matters
The Canadian departure date, the U.S. residency starting date, and the transactions in between decide which country taxes what. Plan the sequence before booking the move.
Frequently asked questions
What should Canadians do before moving to the U.S.?
Withdraw the TFSA, replace Canadian funds, plan the departure tax and the basis election, and decide the future of any corporation or trust.
Should I sell my Canadian mutual funds before moving?
Usually — they become PFICs once you're a U.S. resident.
What happens to my RRSP?
It stays tax-deferred under the treaty — stop contributing.
Is it too late after I've moved?
Some fixes still work, but most are cheaper before U.S. residency starts.
Official sources
The Canada Revenue Agency explains: “If you ceased to be a resident of Canada in the year, you were deemed to have disposed of certain types of property at their fair market value (FMV) when you left Canada and to have immediately reacquired them for the same amount. This is called a deemed disposition.” — Canada Revenue Agency, Dispositions of property for emigrants of Canada, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/dispositions-property.html
The IRS explains: “If you are a U.S. resident for the calendar year, but you were not a U.S. resident at any time during the preceding calendar year, you are a U.S. resident only for the part of the calendar year that begins on the residency starting date. You are a nonresident alien for the part of the year before that date.” — Internal Revenue Service, Publication 519 (2025), U.S. Tax Guide for Aliens, https://www.irs.gov/publications/p519
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk and Canadian Tax Desk handle pre-move tax planning for Canadians — departure computations, basis elections, account clean-up, and corporate and trust restructuring. See pricing or book a call.
Cross-border taxes, handled in one place
U.S. and Canadian filings prepared together by our U.S. and Canadian Tax Desks.
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