Moving a US IRA to Canada: Tax rules, treaty protection, and options for American expats (2026)

Written by  Andrew Coleman, CPA

Last updated Apr 17, 2026

Americans who move to Canada can keep their US IRA accounts open – no transfer, rollover, or closure is required upon relocation. The Canada–US Tax Treaty (Article XVIII, as amended by the Fifth Protocol, 2007) protects continued tax deferral on IRA growth while the individual is resident in Canada, provided the appropriate election is made. The first Canadian T1 return, however, triggers key treaty elections and cross-border reporting obligations.

The following five key thresholds apply to Americans with IRA accounts in Canada for the 2025 tax year (filed in 2026):

• IRA growth: Traditional IRAs are generally not subject to current Canadian taxation on undistributed growth – no annual treaty election required.
• Withholding rate: 30% default on retirement-plan payments to foreign payees; reduced to 15% for periodic pension payments under the Canada–US Treaty with valid documentation on file.
• FBAR threshold: $10,000 combined foreign account balance triggers FinCEN Form 114.
• T1135 threshold: CAD $100,000 in specified foreign property may trigger CRA Form T1135 – a Roth IRA with a valid Article XVIII(7) election and no Canadian contributions is generally excluded.
• Roth IRA treaty election: One-time irrevocable election under Article XVIII(7) – must be filed by the T1 return deadline for the year you first became a Canadian resident.

What happens to your US IRA when you move to Canada?

A US IRA account remains open after the owner establishes Canadian residency – no transfer, rollover, or closure is required. The Canada–US Tax Treaty (Article XVIII, Fifth Protocol 2007) defers Canadian taxation of IRA growth until withdrawal. Moving an IRA to Canada does not constitute a taxable distribution event under IRS rules.

The Canada–US Tax Treaty defines "pensions" broadly under Article XVIII. The following four types of US retirement accounts are generally analyzed under the treaty's pension rules:

The Canada–US Tax Treaty defines "pensions" broadly under Article XVIII. The following four types of US retirement accounts are generally analyzed under the treaty's pension rules:

• Traditional IRA: pre-tax contributions; all distributions taxed as ordinary income in both countries.
• Roth IRA: after-tax contributions; qualified distributions tax-free in the US – treaty election required for Canada.
• SEP IRA: employer-funded pre-tax account; generally analyzed under the treaty's pension rules as a traditional retirement arrangement.
• SIMPLE IRA: generally analyzed under the treaty's pension rules as a traditional retirement arrangement.

Withdrawals from a Traditional IRA in Canada must be reported on both a US Form 1040 and a Canadian T1 return in the year of withdrawal. Neither country automatically waives its claim – the treaty mechanism for avoiding double taxation is the foreign tax credit, not an exemption.

Understanding the options for US IRA account holders living in Canada starts with knowing how each account type is treated under the treaty.

Can you keep a Roth IRA after moving to Canada?

Yes. An existing Roth IRA account remains open after the owner moves to Canada – no action is required simply to preserve the account. For the 2025 tax year, the IRA contribution limit is $7,000 ($8,000 for age 50+), increasing to $7,500 ($8,600 for age 50+) for the 2026 tax year per IRS Notice 2025-67.

However, making new contributions requires compensation includible in US gross income – Americans who exclude Canadian wages under Form 2555 cannot use those excluded amounts toward Roth IRA contributions.

Can you contribute to a Roth IRA while living in Canada?

Roth IRA contributions require compensation includible in US gross income as defined by the IRS. Canadian wages can count toward Roth IRA eligibility if included in US taxable income – but amounts excluded under Form 2555 must be added back when testing eligibility, reducing or eliminating the contribution base entirely.

Americans in Canada who do not use the FEIE and report Canadian wages as fully taxable on Form 1040 may retain Roth IRA eligibility – provided their MAGI falls below the phase-out threshold:

• 2025 tax year: $150,000–$165,000 (single/HoH) and $236,000–$246,000 (married filing jointly).
• 2026 tax year: $153,000–$168,000 (single/HoH) and $242,000–$252,000 (married filing jointly) per IRS Notice 2025-67.

Roth IRA qualified distributions in Canada

Canada does not automatically recognize Roth IRA distributions as tax-free. A Canadian resident must make a one-time irrevocable treaty election under Article XVIII(7) of the Canada–US Tax Treaty by the T1 return deadline for the year they first became a Canadian resident. Without this election, Canada taxes all Roth IRA growth – interest, dividends, and capital gains earned inside the account – as investment income at the applicable provincial rate.

If the deadline was missed, contact the CRA Competent Authority Services Division – a protective election may still be accepted.

Are IRA distributions taxable in Canada?

Yes – distributions received by a Canadian resident are taxable in both countries in the year of withdrawal. US payers generally withhold 30% from retirement-plan payments to foreign payees – under the Canada–US Tax Treaty, periodic pension payments are capped at 15% with valid treaty documentation on file.

Traditional IRA distributions

Traditional IRA distributions are fully taxable as US ordinary income at rates from 10% to 37% (2025 federal brackets), with withholding at 30% default or 15% under the treaty if Form W-8BEN is on file.

Canada taxes the same distributions as ordinary income. The combined federal and provincial rate reaches up to 53.53% in Ontario or 54.80% in Nova Scotia (2025) for income over CAD $246,752. The Canadian resident offsets US taxes withheld via a foreign tax credit on CRA Form T2209.

TFX client scenario (2025 tax year): a US retiree in Vancouver received a $30,000 Traditional IRA distribution – paid 15% to the IRS ($4,500) and topped up to the 46.12% BC rate on the T1 return.

Roth IRA distributions in Canada

Roth IRA qualified distributions (account open five+ years, owner age 59½ or older) are tax-free in the US under IRC Section 408A. In Canada, Roth IRA Canada tax treatment depends entirely on whether the owner made the Article XVIII(7) treaty election by the T1 return deadline for the year they first became a Canadian resident.

Distributions that do not meet the five-year and age 59½ criteria are subject to a 10% IRS early withdrawal penalty plus ordinary income tax on the earnings portion – even when the account owner is a Canadian resident.

Canada–US Tax Treaty and IRA accounts

The Canada–US Tax Convention (1980, Fifth Protocol ratified 2007) governs how the US and Canada tax IRA accounts held by Canadian residents under Article XVIII. Traditional IRAs are generally not subject to current Canadian taxation on undistributed growth – no annual treaty election is required.

So, does Canada recognize Roth IRAs? Yes – but recognition requires a one-time irrevocable election under Article XVIII(7), filed by the T1 return deadline for the year you first became a Canadian resident.

Article XVIII(3)(b) – Traditional IRA treatment in Canada

Traditional IRAs are generally not subject to current Canadian taxation on undistributed growth. Unlike Roth IRAs, there is no annual treaty election required to protect Traditional IRA earnings from Canadian tax – the deferral applies automatically under Canadian domestic tax rules. Canadian tax on a Traditional IRA arises only at the point of withdrawal.

Article XVIII(7) – Roth IRA one-time election

Article XVIII(7) allows a Canadian resident to elect to treat a Roth IRA as a pension for Canadian tax purposes, making qualified distributions permanently tax-exempt in Canada. This election must be filed by the T1 return deadline for the year you first became a Canadian resident.

The election is irrevocable – missing the filing deadline does not automatically close the door; contact the CRA Competent Authority Services Division, as protective elections may be considered.

What is the Roth IRA equivalent in Canada?

Canada has no account called a Roth IRA. The Tax-Free Savings Account (TFSA) is the closest Canada Roth IRA equivalent – after-tax contributions, tax-free growth, and tax-free withdrawals – with a contribution limit of CAD $7,000 for both the 2025 and 2026 tax years per CRA. However, the IRS does not recognize the TFSA as tax-exempt, creating significant compliance risk for US citizens.

RRSP – Canadian equivalent of a Traditional IRA

The Registered Retirement Savings Plan (RRSP) mirrors a Traditional IRA: pre-tax contributions reduce Canadian taxable income, growth is tax-deferred, and withdrawals are fully taxed as ordinary income. The 2025 tax year RRSP contribution limit is CAD $32,490, calculated as 18% of prior-year earned income, rising to CAD $33,810 for the 2026 tax year per CRA. The Canada–US Tax Treaty recognizes the RRSP under Article XVIII.

TFSA – critical warning for US citizens

The TFSA is not recognized as a tax-exempt account under US tax law. Income earned inside a TFSA may be reportable on a US return, but the exact treatment depends on how the account is structured and what it holds. US citizens living in Canada should review their TFSA setup with a cross-border tax advisor before opening or keeping one.

The TFSA may also qualify as a foreign grantor trust under IRS rules, triggering annual Form 3520 and Form 3520-A filing obligations. Whether reporting is required depends on the facts and applicable exemptions – where it is required and missed, penalties under IRC Section 6677 can be significant. A US citizen living in Canada can close a TFSA at any time without US tax consequences.

IRA vs RRSP vs TFSA – Comparison for US persons in Canada 2026

For US citizens living in Canada: the RRSP is the only tax-advantaged account that provides both a Canadian tax deduction and full IRS recognition – the TFSA creates potential Form 3520 reporting obligations with penalties under IRC Section 6677 where applicable, and new Roth IRA contributions require compensation includible in US gross income unavailable to most Canadian-employed Americans.

US persons in Canada should obtain cross-border tax advice before opening any new Canadian account. Tax treatment differs significantly from what Canadian citizen residents experience with the same accounts.

Can you transfer a US IRA to a Canadian RRSP?

Transferring an IRA to Canada via an RRSP is possible but limited. Certain lump-sum payments from a US IRA may be transferred to an RRSP under Section 60(j) of the Canadian Income Tax Act, but only up to the portion that would have been taxable in the US. The transfer is generally made indirectly to the RRSP.

Section 60(j) ITA – the five conditions for an IRA-to-RRSP transfer

The following five conditions apply to an IRA-to-RRSP transfer under Section 60(j) of the Canadian Income Tax Act:

1. The payment must be a lump sum, not periodic payments or an annuity.
2. Only the portion that would have been taxable in the US qualifies – the Canadian resident must have sufficient unused RRSP contribution room to cover that amount.
3. The RRSP contribution must occur in the same calendar year as the IRA distribution, or within 60 days after year-end.
4. The transfer is generally made indirectly to the RRSP – the IRA distribution is included in Canadian income for the year received, and the RRSP deduction offsets that income inclusion.
5. The transfer does NOT eliminate US withholding tax (15% treaty rate or 30% default) – US tax is withheld before the Canadian resident receives funds.

Practical limitations

Most Americans find RRSP room insufficient to absorb a large IRA balance in a single year. RRSP room accrues at 18% of prior-year Canadian earned income, capped at CAD $32,490 for the 2025 tax year (rising to CAD $33,810 for the 2026 tax year). The 15% US withholding on the distribution creates an immediate tax cost that cannot be avoided even under the treaty.

TFX client scenario: a US engineer who moved to Toronto in 2022 executed a Section 60(j) transfer of $28,000 in 2025 – his three years of accumulated RRSP room exactly covered the amount.

What happens to an inherited IRA for a Canadian resident?

A Canadian resident who inherits a US IRA must follow IRS rules under the SECURE Act of 2019 (Pub. L. 116-94): non-spouse beneficiaries must withdraw the entire inherited IRA in Canada balance within 10 years of the original owner's death (for owners who died after December 31, 2019). Canada taxes each annual distribution as ordinary income in the year received.

The inherited IRA does not receive Canada–US Tax Treaty deferral protection equivalent to a spousal rollover. A non-spouse Canadian beneficiary cannot roll the inherited IRA into their own IRA or contribute it to an RRSP under Section 60(j). The Canadian beneficiary claims a foreign tax credit on CRA Form T2209 for US taxes withheld on each distribution.

Reporting requirements for IRA accounts as a Canadian resident

Americans living in Canada face filing obligations in both countries for US IRA accounts.

In Canada, Form T1135 is required when specified foreign property exceeds CAD $100,000 – note that a Roth IRA with a valid Article XVIII(7) election and no Canadian contributions is generally excluded from T1135 reporting per CRA guidance.

In the US, the IRA held at a US custodian is a domestic account and does not trigger FBAR or Form 8938 reporting.

US reporting obligations

The following three US reporting obligations apply to Americans in Canada – note that a US-custodied IRA is NOT a foreign account for FBAR or FATCA purposes:

• FBAR (FinCEN Form 114): required if all foreign financial accounts (Canadian bank accounts, RRSP, TFSA) exceed $10,000 combined at any point during the 2025 tax year. The US IRA held at a US custodian does NOT trigger FBAR.
• Form 8938 (FATCA): required for specified foreign financial assets exceeding $200,000 on the last day of the 2025 tax year (single filers residing abroad). Canadian RRSP and bank accounts are reportable. The US IRA is not a foreign asset for Form 8938.
• Form 3520 / 3520-A: required annually if the taxpayer holds a TFSA (potentially classified as foreign grantor trust under IRC Section 643(i)).

Canadian reporting obligations

Canadian residents with specified foreign property exceeding CAD $100,000 must file Form T1135 (Foreign Income Verification Statement) annually.

Whether a US IRA qualifies as specified foreign property depends on its type and treaty status – a Roth IRA with a valid Article XVIII(7) election and no Canadian contributions is generally excluded.

Penalty for non-filing: CAD $25 per day, up to CAD $2,500 per year, under Section 162(7) of the Canadian Income Tax Act. Enhanced penalties apply if CRA issues a formal demand.

Conclusion

The following five actions determine whether a US IRA is managed correctly after moving to Canada:

• Form W-8BEN: submit to the IRA custodian before the first withdrawal – ensures valid treaty documentation is on file to reduce withholding on periodic pension payments (Treaty Article XVIII(2)).
• Roth IRA treaty election: file the one-time irrevocable election under Article XVIII(7) by the T1 return deadline for the year you became a Canadian resident – if missed, contact the CRA Competent Authority Services Division.
• Form T1135: required annually if specified foreign property exceeds CAD $100,000 – whether a US IRA counts depends on its type and treaty status (penalty: CAD $25/day under Section 162(7) ITA).
• TFSA: avoid opening a TFSA as a US citizen – potential Form 3520 reporting obligations; penalties under IRC Section 6677 where applicable.
• RRSP room: begin accumulating RRSP room early if planning a Section 60(j) IRA-to-RRSP transfer – 2025 tax year annual cap is CAD $32,490, rising to CAD $33,810 for the 2026 tax year.

Moving a US IRA to Canada involves simultaneous obligations under two tax systems governed by a bilateral treaty. Taxes for Expats has prepared US expatriate tax returns since 1999 and specializes in Canada–US cross-border retirement account optimization, treaty elections, and dual-country compliance.

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Andrew Coleman

CPA

Andrew Coleman, an accomplished CPA with a Master's in Accounting from the University of Kansas, has 15 years of experience. He specializes in expatriate taxation and provides customized advice to US expatriates.

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