Expat tax · US-Canada treaty
The US tax treaty Canada signed in 1980 leaves both countries free to tax you, but its credits relieve most double tax.
The US-Canada tax treaty has generally applied since 1985, and a 2007 protocol last amended it. Article XXIV sets the credits each country gives, and the US credit works within the limits of US law.
Updated · Sources
The Canada-US tax treaty for individuals
- 15%
- is the treaty’s cap on most dividends and periodic pension payments paid across the border.
- 85%
- is the most of a Canadian resident’s US Social Security that Canada taxes, and the US taxes none of it.
- $0
- of US tax is due on RRSP or RRIF growth until you take money out.
Canadian residents who have received US Social Security every year since before 1996 may have only 50% of it taxed. The $0 assumes you filed every required US return and reported any past withdrawals as if the growth had been deferred. Reporting the growth as income even once ends it (see Traps).
Who can use the Canada-US income tax treaty?
For an individual, the treaty turns on where you are resident for tax purposes. Run these four tests in order.
You are resident in the US or Canada
A resident is anyone a country taxes because of domicile, residence, citizenship or a similar tie. A US citizen or green card holder living outside both countries needs more to count as a US resident. The treaty requires a permanent US home, habitual abode or substantial presence, and closer ties to the US than to any third country.
A tie-breaker settles dual residence
If both countries treat you as resident, Article IV(2) picks one. It looks first at your permanent home, then your centre of vital interests, habitual abode and citizenship, in that order. If none of those settles it, the two tax authorities decide by mutual agreement.
Individuals pass the limitation on benefits
Article XXIX A gives full treaty benefits only to a qualifying person, to stop treaty shopping. Every individual resident in either country qualifies, so the test matters only for companies and other entities.
The saving clause keeps US tax on US citizens
The saving clause in Article XXIX(2) lets the US tax its citizens under its own law, wherever they live. For US tax, only the articles it excepts still help, such as Article XXIV on credits and Article XVIII(7) on RRSPs. Canada’s treaty limits on its own tax still protect them.
The treaty lets the US tax a former citizen or long-term resident on US-source income for ten years after that status ends. US law now applies that only to people who gave up citizenship or a green card before June 17, 2008.
What are the Canada-US tax treaty withholding rates?
The treaty caps what the paying country can tax, and the caps work the same in both directions. Unlike the US-UK treaty, this one also lets the paying country tax a periodic pension.
Dividends
C$1,500
The Canada-US tax treaty caps Canada’s tax on these dividends at 15% for an individual. A company owning at least 10% of the voting stock pays at most 5%.
Periodic pension
C$1,500
Canada can tax each periodic pension payment at up to 15% of the gross amount.
Interest
C$0
Since the 2007 protocol, interest is generally taxable only where the lender lives.
CPP or OAS
C$0
Only the US taxes CPP or OAS paid to a US resident, and it taxes them as if they were US Social Security.
The dividend cap is in Article X(2)(b), and the pension cap in Article XVIII(2)(a). The interest rule is in Article XI(1), and the benefits rule in Article XVIII(5)(b). Your US return then credits the Canadian tax against the US tax on that income, within the foreign tax credit limit.
The US-Canada treaty defers US tax on RRSP growth, and does not cover a TFSA.
Rev. Proc. 2014-55 made the treaty’s deferral election automatic for eligible RRSP and RRIF owners. It also retired Form 8891 on December 31, 2014. TFSAs began in 2009, after the last protocol was signed, and no treaty article or IRS guidance names them.
| RRSP or RRIF | TFSA | |
|---|---|---|
| Canadian tax on growth | None inside the plan | None inside the account On qualified investments |
| Under the treaty | A retirement plan Article XVIII(7) | Not covered |
| US tax on growth | Deferred until withdrawn | Income taxed as earned Under US law |
| The deferral election | Automatic Rev. Proc. 2014-55 | Not available |
| Form 3520 | Not required | IRS has not said |
Canadian mutual funds and ETFs in a TFSA are usually passive foreign investment companies (PFICs) under US law. Funds inside an RRSP usually need no Form 8621, under a Treasury rule for treaty pension plans. That rule does not reach a TFSA.
What Americans in Canada miss about the treaty and Social Security.
Reporting RRSP growth once ends the automatic deferral
Once you report an RRSP’s undistributed income on a US return, the automatic deferral no longer covers that plan. You stay taxable on its income each year, and electing the deferral later needs the IRS Commissioner’s consent.
A personal RRSP contribution does not cut US tax
Neither the treaty nor Rev. Proc. 2014-55 makes a contribution to a personal RRSP deductible on a US return. Article XVIII(13) helps a US citizen employed in Canada by a Canadian employer. It allows a US deduction for contributions to that employer’s plan, including a group RRSP, within US limits.
A treaty residence claim can count as expatriating
If you hold a green card and claim Canadian residence under the tie-breaker, you must disclose it on Form 8833. For a long-term resident, Form 8833 warns that this counts as expatriating under Section 877A. For tax purposes, that is the same as giving up your green card.
Leaving Canada brings a departure tax
Canada taxes you as if you sold most of your property at fair market value when you stop being resident. Article XIII(7) lets you elect a matching sale on your US return, which resets your US basis to that value. For a US citizen, the US then taxes the gain in the same year and can credit Canada’s tax. RRSPs, RRIFs, TFSAs and Canadian real estate are outside the departure tax. Property you brought to Canada or inherited is also exempt if you were resident for 60 months or less of the prior 120.
CPP and OAS may still face US tax
The treaty does not settle whether the US can tax the CPP or OAS of a US citizen living in Canada. Its social security rule covers benefits paid to a resident of the other country, and no IRS guidance addresses this case. If the US does tax them, the credit for Canadian tax can offset it.
Self-employed people need a certificate of coverage
Under the US-Canada totalization agreement, in force since August 1, 1984, a self-employed person pays social security tax only where they live. Request a certificate on form CPT56, or QUE/USA 101 in Quebec, and attach a copy to your US return every year.
A CPA checks every treaty rule on your US return from Canada.
Valim’s CPAs apply the US-Canada tax treaty to the US returns of Americans who live in Canada. We work alongside your Canadian accountant and file no Canadian return.
- We claim the Canadian tax from your accountant’s return as a credit on Form 1116.
- We file your FBAR and report each RRSP and RRIF on a distribution basis, which keeps its growth deferred. The instant quote counts each account and each foreign fund.
- We set US estimated payments for the tax on TFSA income.
- We test the credit against the foreign earned income exclusion, and plan the US side of leaving Canada.
- If the IRS questions a treaty position on a return we prepared, our answer costs you nothing more.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
US-Canada tax treaty questions.
Is there a tax treaty between the US and Canada?
Yes, the US and Canada signed their income tax convention on September 26, 1980, and it generally took effect on January 1, 1985. Five protocols have amended it, the last signed in 2007 and in force since December 15, 2008. The IRS posts the Canada-US tax treaty in two files: one with the first four protocols, and one with the 2007 protocol. A separate totalization agreement, in force since August 1, 1984, coordinates Social Security with the Canada Pension Plan.
Do I pay tax in both Canada and the US?
Yes, if you are a US citizen living in Canada, both countries can tax you. Canada taxes residents on worldwide income, and the treaty’s saving clause lets the US keep taxing its citizens. Article XXIV then relieves most double tax on the same income, through credits. The US gives a foreign tax credit for the Canadian tax on your Canadian income. On US income, Canada gives a limited credit for the US tax, and the US credits the Canadian tax left over.
How are RRSPs and TFSAs treated?
Under the US-Canada tax treaty, US tax on growth inside an RRSP or RRIF can wait until money comes out. Since Rev. Proc. 2014-55, that deferral is automatic if you filed every required US return and never reported the plan’s growth as income. A TFSA is not covered, so its income is taxable on your US return each year. The IRS has not said whether a TFSA must be reported on Form 3520 as a foreign trust. An RRSP or RRIF still counts for the FBAR and Form 8938.
Does Canada tax a US citizen who lives in the US?
Only on some Canadian income, and the treaty caps that tax. Canada’s tax on dividends paid to an individual stops at 15%, and so does its tax on each periodic pension payment. Americans in Canada are Canadian residents instead, so Canada taxes their income from everywhere and the US credits that tax.
Who qualifies for the US tax treaty?
Any resident of the US or Canada qualifies for the US-Canada tax treaty, meaning someone taxed there by domicile, residence, citizenship or similar criteria. A US citizen living outside both countries also needs close ties to the US. If both countries claim you, the tie-breaker in Article IV picks one. For US tax, US citizens get only the articles the saving clause excepts, though Canada’s limits on its own tax still apply. Other US treaties set their own tests, such as the US-UK tax treaty.
Sources
- US-Canada income tax convention, as amended (IRS text)
- Fifth protocol to the US-Canada convention (2007)
- US Treasury, Technical Explanation of the 2007 protocol
- IRS, Rev. Proc. 2014-55 (Canadian retirement plans)
- IRS, Instructions for Form 3520 (Rev. December 2025)
- IRS, Publication 915, Social Security and Equivalent Railroad Retirement Benefits
- IRS, Form 8833 (Rev. December 2022), Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)
- 26 U.S.C. § 1297, Passive foreign investment company
- 26 U.S.C. § 877, Expatriation to avoid tax
- 26 CFR § 1.1298-1, Section 1298(f) annual reporting requirements
- Income Tax Act (Canada), s. 2, Tax payable by persons resident in Canada
- Income Tax Act (Canada), s. 146.2, Tax-free savings accounts
- Income Tax Act (Canada), s. 110, Deductions permitted
- Income Tax Act (Canada), s. 128.1, Changes in residence
- Social Security Administration, US international social security agreements
- Social Security Administration, Totalization Agreement with Canada
Reviewed and updated September 2026. General information, not advice for your situation.