What Happens to Your RRSP and TFSA When You Move to the U.S.?

Every Canadian heading south owns some mix of the same two accounts — and almost everyone assumes they'll be treated alike. They couldn't be more different. One is explicitly protected by the tax treaty; the other isn't mentioned in it at all. Here's what actually happens to each, and the decisions worth making before the move.

The RRSP: protected — keep it, but know three things

The treaty lets a U.S. resident defer U.S. tax on income accruing inside an RRSP or RRIF until money comes out — mirroring the Canadian deferral. So the default answer for the RRSP is calm: you generally keep it, and it keeps working.

Three things to know anyway:

1. Deferred isn't invisible. The account still counts for FBAR and, where thresholds apply, Form 8938 — every year.
2. Contributions from the U.S. rarely make sense. You'll usually have no Canadian earned income generating contribution room, and a contribution deducted nowhere is a poor trade. The RRSP becomes a grow-in-place asset, not an active one.
3. Withdrawals get taxed by Canada at flat non-resident rates. As a U.S. resident, Canada withholds 25% on lump-sum RRSP withdrawals. Convert to a RRIF and take periodic payments that qualify under the treaty, and the rate drops to 15%. That 10-point spread — and the definition of "periodic" — is the heart of cross-border retirement-income planning, and it's worth real money on a large account. The U.S. then taxes its share of the withdrawal too, with a foreign tax credit for the Canadian withholding doing the reconciliation — the credit math works best when the two countries' timing is planned, not accidental.

The TFSA: unprotected — usually collapse it before you go

The treaty's silence on the TFSA means the U.S. sees an ordinary foreign investment account: its interest, dividends, and gains are U.S.-taxable every year, with no Canadian tax to credit against (Canada isn't taxing it), plus the reporting stack — and, depending on the account's legal structure, a possible foreign-trust question dragging in Forms 3520/3520-A, two of the most penalty-laden forms in the system. We cover that whole mess in the TFSA and Form 3520 guide.

The clean move is timing: withdraw and close the TFSA while you're still exclusively a Canadian resident. Canada charges nothing on TFSA withdrawals, the accumulated growth exits tax-free forever, and the entire U.S. problem never comes into existence. Keeping a TFSA as a U.S. resident is occasionally defensible for a large account with advice behind it — but "I just never got around to closing it" is how most people end up holding one, and it's the most expensive version of inertia in the whole move.

One more nuance: don't contribute after you've left. Non-residents who contribute to a TFSA face a penalty tax of 1% per month on those contributions — a trap for anyone with automatic deposits still running.

The problem nobody warns you about: your brokerage

Securities rules, not tax rules, produce the first surprise for many movers: once you have a U.S. address, many Canadian brokerages and advisors can't legally keep managing your non-registered account — and policies vary even on RRSPs (many institutions will hold and allow trades in registered accounts for U.S. residents; some restrict them to hold-only; a few want the relationship gone entirely). You may get a letter giving you months to move or liquidate. Finding out after the move, with the departure tax already crystallized and markets doing whatever markets do, is the bad version. Calling your institution before the move — "what happens to each of my accounts when my address changes?" — is the free version.

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Related reading: - Is Your TFSA a Foreign Trust? Form 3520 and What "Tax-Free" Costs in the U.S. - Canada's Departure Tax, Explained: T1161 and T1243