Canada’s rates exceed US rates, so if you are an American living in Canada, taxes you pay there usually cover US tax on wages.
Canada taxes you on world income as a resident, and US citizenship keeps you taxable in the US wherever you live. On Form 1116, the Canadian tax then comes off your US tax, up to what the US charges on that income. In Ontario in 2026, taxable income just above C$100,000 is taxed at 29.65% before Ontario’s surtax, against 22% or 24% in the US.
Updated · Sources
Tax year 2026
- 46.16%
- is the top federal and Ontario rate, before Ontario’s surtax, against a top US rate of 37%.
- $132,900
- is the most foreign pay the exclusion shelters, and it bars any credit for Canadian tax on that pay.
- April 30
- is when your Canadian return is due, six weeks before the automatic June 15 date for your US return.
C$ amounts are Canadian dollars. Other provinces set their own rates, and Quebec’s come from Revenu Québec.
How does the US tax your Canadian savings and benefits?
The tax treaty settles the RRSP and Social Security. A totalization agreement, in effect since 1984, decides which country’s social security system a self-employed American pays into. US law alone decides the TFSA.
An RRSP or RRIF
Under the treaty, an RRSP (registered retirement savings plan) or RRIF (registered retirement income fund) grows with no US tax until you withdraw. You need no election form if you filed every required US return, never reported earnings left in the plan, and reported each withdrawal. Contributions to a personal RRSP do not lower your US tax.
A TFSA
Canada leaves the earnings of a TFSA (tax-free savings account) untaxed, and no treaty article mentions the account. The US taxes a TFSA’s income every year, with no Canadian tax to credit against it. The IRS has not said whether a TFSA is also a foreign trust, which would mean filing Form 3520.
US Social Security
Under the treaty, only Canada may tax your US Social Security once you live there, even if you are a US citizen. Canada taxes it like a Canada Pension Plan (CPP) benefit, less the exempt share. No IRS guidance says whether the US may tax CPP and Old Age Security (OAS) paid to a US citizen in Canada.
Self-employment income
Under the totalization agreement, a self-employed American in Canada pays into the CPP (the QPP in Quebec) instead of US self-employment tax. Neither the exclusion nor the credit would reduce that US tax. Attach a certificate of coverage to each year’s US return to prove it.
In Canada, the credit usually beats the exclusion.
The credit and the exclusion can each clear the US tax on a Canadian salary. Only the credit keeps the Canadian tax the US did not need, for use in other years.
No relief
$13,170
This is what the US would charge on the salary if nothing offset it.
Exclusion (Form 2555)
$0
The whole salary falls under the exclusion’s cap, so none of the $25,000 can be credited or carried over.
Credit (Form 1116)
$0
The credit uses $13,170 of the Canadian tax. The other $11,830 becomes a carryover, usable one year back or up to 10 years ahead.
The US tax is figured at the 2026 single rates of 10%, 12% and 22%. They apply to $83,900 of taxable income, after the $16,100 standard deduction. The $25,000 of Canadian tax is a round figure, not worked out from Canadian brackets. All the pay is from Canada, so the credit’s limit is the whole US tax.
Canada’s return comes first, so its tax figure is ready for your US credit.
Both countries tax the calendar year, so the same year’s income goes on both returns.
| Canada | United States | |
|---|---|---|
| Who is taxed | Residents On world income, in Canadian dollars | Citizens and green card holders On income from anywhere |
| Return due | April 30 June 15 if you or your spouse or common-law partner is self-employed | June 15 from abroad October 15 with Form 4868 |
| Tax due | April 30 For everyone | June 15 from abroad Interest runs from April 15 |
| Foreign tax credit | Form T2209 For tax paid to the US | Form 1116 For tax paid to Canada |
The FBAR is due April 15 and extends automatically to October 15. You file it with FinCEN, separately from both tax returns.
Four points a US return from Canada has to get right.
Your RRSP still goes on the FBAR
An RRSP that grows free of US tax must still be reported. Its value counts toward the FBAR’s $10,000 threshold, and once your foreign accounts pass it, the plan goes on the FBAR. It counts toward Form 8938 too.
Tax on your pay cannot cover tax on investments
Form 1116 keeps wages and most interest and dividends in separate categories, each with its own limit. Extra Canadian tax on your salary, carryovers included, cannot reduce the US tax on your investment income. That income needs Canadian tax of its own to credit.
Canadian mutual funds are usually PFICs
A Canadian mutual fund or ETF is usually a passive foreign investment company for US tax, in a TFSA or not. Each fund generally needs its own Form 8621 every year, unless your funds total $25,000 or less ($50,000 joint) and paid no excess distribution. Funds held in an RRSP or RRIF can normally skip that form.
Leaving Canada is taxed as a sale
Canada’s departure tax treats most property, such as shares and funds, as sold at fair market value on the day you leave. Canadian real estate, pensions, RRSPs, RRIFs and TFSAs are left out. A treaty election under Article XIII(7) lets the US treat the sale as happening that day too, so both taxes fall in one year.
A US CPA builds your return from the tax you already paid in Canada.
Valim’s CPAs prepare the US returns and FBARs of Americans living in Canada. We work from the Canadian return your accountant files.
- We credit the tax shown on your Canadian return against your US tax, using Form 1116, and track what carries to later years.
- We list your RRSP and every other Canadian account on the FBAR, and on Form 8938 when it applies. Your instant quote prices each of those accounts, each Canadian fund, and each Canadian company you own over 20% of.
- We set US estimated payments when Canadian withholding will not cover your US tax.
- We weigh the credit against the exclusion on your figures, and plan around a move to or from Canada.
- We reply to IRS or state letters on any return we prepared, and that reply costs nothing extra.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
Questions from Americans living in Canada on filing in both countries.
Do US citizens living in Canada pay taxes?
Yes, Canada taxes US citizens who live there like any other resident, and the US expects a return once income reaches its filing threshold. Foreign pay they exclude still counts toward that threshold. Net self-employment earnings of $400 or more require a return on their own. The US credit for Canadian tax usually leaves little or no US tax on Canadian pay. In Canada, the foreign tax credit generally works better than the foreign earned income exclusion.
What is the 90% rule in Canada?
The 90% rule decides whether a non-resident of Canada can claim federal non-refundable tax credits in full. The test is whether Canadian-source income is 90% or more of net world income for the time spent as a non-resident. Below that, the credits are limited. It also reaches newcomers and emigrants, for the part of the year they lived outside Canada.
How much tax do you pay on $100,000 a year in Canada?
In Ontario in 2026, C$100,000 of taxable income carries about C$23,636 of income tax: about C$16,696 federal and C$6,940 Ontario. That is before Ontario’s surtax, and before tax credits bring it down. Canada Pension Plan (CPP) and Employment Insurance (EI) contributions and the Ontario health premium are charged on top. Other provinces set their own rates. The total is usually more than an American would owe the US on the same pay, so the credit clears the US tax.
Do I have to pay double tax for Canada and the US?
Generally no, since each country gives credit for tax paid to the other on the same income. On Canadian income, your US return credits the Canadian tax. On US income, Canada credits the US tax only up to what a non-citizen would owe, under Article XXIV of the treaty. The US then allows a credit for whatever Canadian tax remains. Americans in the UK get the same order under Article 24 of their treaty.
How is a US pension taxed if I live in Canada?
Both Canada and the US can tax a US pension paid to you in Canada. Canada taxes it as your country of residence, and the US keeps taxing it because you are a citizen. Canada’s credit for the US tax stops at 15% of each periodic payment, the treaty’s cap for a non-citizen. Any Canadian tax left after Canada’s credit is then credited on your US return. Americans in France are in a different position, since only the US taxes their US pensions.
Sources
- US-Canada income tax convention, as amended (IRS text)
- IRS, Publication 597 (10/2015), Information on the United States-Canada Income Tax Treaty
- IRS, Rev. Proc. 2014-55 (Canadian retirement plans)
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- IRS, Publication 54 (12/2025), Tax Guide for U.S. Citizens and Resident Aliens Abroad
- IRS, Publication 915, Social Security and Equivalent Railroad Retirement Benefits
- 26 U.S.C. § 901, Taxes of foreign countries and of possessions of United States
- 26 U.S.C. § 904, Limitation on credit
- 26 U.S.C. § 911, Citizens or residents of the United States living abroad
- 26 U.S.C. § 6017, Self-employment tax returns
- 26 U.S.C. § 1297, Passive foreign investment company
- 26 CFR § 1.1298-1, Section 1298(f) annual reporting requirements
- 31 CFR § 1010.350, Reports of foreign financial accounts
- Social Security Administration, Totalization Agreement with Canada
- Income Tax Act (Canada), s. 110 (the US Social Security deduction)
- Income Tax Act (Canada), s. 128.1 (changes in residence)
- Income Tax Act (Canada), s. 146.2 (tax-free savings accounts)
- Canada Revenue Agency, current-year tax rates and income brackets (2026)
- Canada Revenue Agency, important dates for individuals
- Canada Revenue Agency, 5006-PC Information for Residents of Ontario (the Ontario health premium)
- Canada Revenue Agency, federal non-refundable tax credits for newcomers and emigrants
- Canada Revenue Agency, deemed dispositions of property for emigrants
Reviewed and updated September 2026. General information, not advice for your situation.