If you're an American living in Canada, you're probably not going to owe the IRS much on your paycheque. Canadian federal and provincial tax is higher than US tax on the same income, and the foreign tax credit usually brings your US bill on wages to zero. What catches people is everything else: the TFSA your bank set up, the ETFs in it, the RESP for your kids, the house you sold in Toronto. That's where we spend our time with Canadian clients, and where this page spends its time too.
This applies just as much if you're a dual citizen, or an "accidental American" who was born in the US and has barely been back. Figures are for tax year 2025, the returns you file in 2026, and Canadian dollars are converted at the IRS 2025 average rate of C$1.398 to US$1.
When are the Canadian and US returns due?
Both countries use the calendar year, so your 2025 T1 and 2025 Form 1040 cover the same months. The Canadian return is due first, which suits us: we need your final Canadian tax figures to claim the credit on the US side.
| Return | Filing deadline | Payment deadline |
|---|---|---|
| Canadian T1 (most individuals) | April 30, 2026 | April 30, 2026 |
| Canadian T1 (self-employed, and their spouses or partners) | June 15, 2026 | April 30, 2026. The later filing date doesn’t move the payment date |
| US Form 1040 (living in Canada on the due date) | June 15, 2026 (automatic two-month extension for filers abroad) | April 15, 2026. Interest runs from April 15 on anything unpaid |
| US Form 1040 with Form 4868 | October 15, 2026 | April 15, 2026 |
| FBAR (FinCEN 114) | April 15, 2026, automatically extended to October 15, 2026 | None. It’s a report, not a tax |
To use the June 15 date, you attach a short statement saying you were living outside the US on the regular due date. If you need until October, file Form 4868 by June 15. Most of our Canadian clients file the T1 by April 30 and the 1040 in May or June.
FEIE or foreign tax credit for Americans in Canada?
You have two tools. The Foreign Earned Income Exclusion (Form 2555) takes up to $130,000 of foreign wages or self-employment income off your US return for 2025 ($132,900 for 2026), provided you pass the bona fide residence or physical presence test. The Foreign Tax Credit (Form 1116) gives you a dollar-for-dollar credit for the Canadian income tax you paid, on any kind of income: wages, interest, dividends, rent, pensions, capital gains.
Our default in Canada is the credit, and for most people it isn't close. Canadian tax usually exceeds the US tax on the same income, so the credit wipes out the US bill and leaves some over, which can be carried back a year or forward ten. That's handy the year you sell something with a big gain. The credit also works on investment income, and it keeps two things the exclusion takes away: the refundable part of the child tax credit, and the ability to fund an IRA from your wages.
The exclusion still wins occasionally, say in a year when big RRSP deductions pushed your Canadian tax right down. Be careful switching back and forth, though. If you've claimed the exclusion and then revoke it, you generally can't claim it again for five years without IRS consent.
Example: Hannah, a US citizen working in Toronto
Say Hannah is single, lives in Toronto and earns C$150,000 (US$107,296) in 2025, with no US income. Her federal and Ontario tax comes to about C$39,000 (US$27,897). That's an illustrative figure; her real T1 depends on her deductions and credits.
On the US side, her tax on US$107,296 after the 2025 standard deduction is roughly US$15,000. Form 1116 lets her claim Canadian tax up to the US tax on that foreign income, so she claims about US$15,000 and her US income tax is $0. The other US$12,800 or so of Canadian tax carries forward as unused credit.
Her CPP contributions and EI premiums aren't income taxes, so they don't count toward the credit. Under the totalization agreement she pays into CPP instead of US Social Security, not both. She still files an FBAR for her bank account, RRSP and TFSA, and the TFSA needs its own US treatment, which we get to below.
One wrinkle if you have a lot of US investment income: the credit only offsets US tax on foreign-source income, and US dividends are US-source even though Canada taxes them first. Article XXIV of the treaty re-sources that income for US citizens in Canada so it doesn't fall between the two systems, but the Form 1116 needs careful work.
What the US–Canada treaty does (and doesn't) do for US citizens
The US–Canada treaty is one of the better ones for Americans abroad, but its saving clause (Article XXIX) lets the US tax its citizens as if the treaty didn't exist, with a short list of exceptions. Two matter here: Article XVIII, which protects your RRSP and decides who taxes CPP and OAS, and Article XXIV, the credit and re-sourcing rules above. Assume the rest doesn't help you as a citizen. A treaty position that overrides the tax code may need disclosing on Form 8833; some do and some don't, so we check each one.
How the US treats your RRSP and RRIF
Your RRSP and RRIF are the Canadian accounts the IRS treats most kindly. Under Article XVIII(7), you don't pay US tax on growth inside the plan until you take money out. Since Rev. Proc. 2014-55 that deferral is automatic: there's no Form 8891 any more, and no separate foreign-trust filing on Form 3520 for the plan. It still goes on your FBAR, and on Form 8938 if you're over the thresholds.
The catch is on the way in: your RRSP deduction lowers your Canadian tax only. Contributions from income the US already taxed do give you US basis, though, so when you withdraw, the US taxes only the part above your basis, and the Canadian tax on it is creditable. Keep your contribution records. Employer plans (RPPs) and locked-in accounts like LIRAs raise similar questions, and the answer depends on the plan, so bring the statements.
Is a TFSA taxable for Americans in Canada?
Yes, and it surprises more of our clients than anything else. The TFSA isn't in the treaty, so to the IRS it's a regular taxable account. Interest, dividends and gains go on your 1040 each year, and since Canada doesn't tax them, there's no credit to offset them. That's real US tax.
Then there's the paperwork question. Many practitioners treat a TFSA as a foreign grantor trust and file Forms 3520 and 3520-A every year; others treat a plain custodial TFSA as an ordinary account and don't. The IRS hasn't settled it, and the penalties for a missed 3520 are steep, so decide deliberately with whoever prepares your return rather than by default. If the TFSA holds Canadian mutual funds or ETFs, add a Form 8621 for each one.
Example: Marcus, a dual citizen with a TFSA of Canadian ETFs
Take Marcus, a Canadian–US dual citizen in Calgary. His TFSA holds C$60,000 (US$42,918) in two Canadian-listed index ETFs, which paid C$1,800 (US$1,288) in distributions in 2025.
In Canada there's nothing to report. In the US, each ETF is a PFIC, so he files two Forms 8621. Unless he's made a mark-to-market election (or a QEF election, if the fund provides the information), his distributions and any gains fall under the punitive "excess distribution" rules. Depending on the position he and his preparer take, the TFSA may need Forms 3520 and 3520-A as well, and it counts toward his FBAR.
So he pays US tax on money he thought was tax-free, plus several information returns a year, for a C$60,000 account. For a lot of Americans we'd suggest a TFSA in cash or individual stocks, or no TFSA at all. A return with PFICs falls under our Premier tier ($475).
RESPs, RDSPs and FHSAs: the other plans the treaty doesn't cover
The RESP is the one parents ask about most. It isn't treaty-protected, and many practitioners treat it as a foreign grantor trust owned by the subscriber, usually the parent. That makes its income taxable to the parent each year and may bring Forms 3520 and 3520-A with it. In many practitioners' view the Canada Education Savings Grant is taxable income to the subscriber too, even though only the child can use it. Views differ on both points. If you have a spouse who isn't a US person, making them the subscriber is worth talking through before you open the plan.
The RDSP is genuinely unsettled. It isn't in the treaty, the government grants and bonds raise the same questions as the CESG, and practitioners disagree on whether it's a foreign trust and when its income is taxed. This one needs advice on your specific plan.
The FHSA, available since 2023, postdates the treaty and the IRS hasn't issued any guidance recognising it. The prevailing view is that contributions aren't deductible on your US return and that the account is taxed like a TFSA, possibly with foreign-trust reporting. In all three, Canadian funds are PFICs.
Why Canadian ETFs and mutual funds are a problem for US citizens
For US purposes, almost any pooled fund organised outside the US is a passive foreign investment company, or PFIC. That covers Canadian mutual funds, Canadian-listed ETFs and most other Canadian pooled products, in whatever account they sit. Without an election, gains and larger distributions are taxed at the top ordinary rate plus an interest charge, and each fund needs its own Form 8621 every year. It's one of the few things on this page we'd call a genuine trap.
The usual fix is individual stocks and bonds, or US-domiciled ETFs. Not every Canadian brokerage offers US-listed funds, and holding them changes your Canadian picture too (Form T1135 foreign-property reporting, recovering US dividend withholding). Don't sell what you have until you've worked out the tax on the sale in both countries. If you do keep PFICs, each fund beyond the first is $75 on top of Premier.
Does the US tax CPP, QPP and OAS?
Two agreements are in play. The US–Canada Totalization Agreement decides which system you pay into, so you don't pay both, and lets you combine coverage in each country to qualify for benefits. Work for a Canadian employer in Canada and you generally pay CPP or QPP only. If you're self-employed, your country of residence generally covers you, so you pay CPP or QPP and not US self-employment tax; you may need a certificate of coverage to prove it.
Who taxes the benefits is a treaty question, under Article XVIII(5). It's one of the saving-clause exceptions, so it applies to US citizens:
| You receive | While living in | Generally taxed by |
|---|---|---|
| CPP / QPP or OAS | Canada (including US citizens) | Canada only. Report it on the 1040 and exclude it under the treaty |
| CPP / QPP or OAS | The United States | The US only, treated as if it were US Social Security |
| US Social Security | Canada | Canada only, with part of the benefit exempt under the treaty |
Those are the general rules. The OAS recovery tax (the Canadian clawback) and the details of each benefit can shift the result, so check your own numbers before relying on them.
Selling your home in Canada: what the US sees
The Canadian principal residence exemption can make your gain entirely tax-free in Canada. It doesn't exist on your US return. What you get instead is Section 121: up to $250,000 of gain excluded, or $500,000 for most married couples filing jointly, if you owned the home and lived in it for two of the five years before the sale. Anything above that is taxable in the US, and with no Canadian tax to credit against it, it's real money.
The part people don't expect is currency. The US converts your purchase price at the rate when you bought and your sale price at the rate when you sold, so if the Canadian dollar strengthened in between, your US gain can be bigger than your Canadian one, or exist when there's no Canadian gain at all. The mortgage can bite too: paying off a Canadian-dollar mortgage after the loonie has weakened creates a US foreign-currency gain, taxable as ordinary income, while a currency loss on a personal mortgage generally isn't deductible.
If you've owned in Toronto or Vancouver for a long time, run the numbers before you list. Foreign tax credit carryforwards from earlier years can sometimes soak up part of the US tax.
FBAR and FATCA for your Canadian accounts
You file an FBAR (FinCEN 114) if the highest balances of all your foreign accounts, added together, went over $10,000 at any point in 2025. That's a low bar in Canada. Chequing, savings, GICs, brokerage accounts and every registered account count, including your RRSP, RRIF, TFSA, RESP and FHSA. So do joint accounts with a Canadian spouse and, in some cases, accounts you can only sign on. Our FBAR guide has the detail, or we can file it for you.
Form 8938 (FATCA) goes with your 1040 and has much higher thresholds if you live abroad. Single filers and those married filing separately file it once foreign assets top $200,000 on December 31 or $300,000 at any point in the year. For married couples filing jointly it's $400,000 and $600,000.
The IRS already knows about your Canadian accounts
Under the Canada–US FATCA agreement, Canadian banks, brokerages and insurers flag account holders with US indicia, such as a US birthplace, and report them to the CRA, which passes the information to the IRS. That letter from the bank is how a lot of accidental Americans first find out they have a US filing obligation.
Running a Canadian corporation (CCPC) as a US citizen
Plenty of Canadian doctors and consultants work through a corporation. If you're a US citizen and you control it, your CCPC is almost certainly a controlled foreign corporation to the IRS. That means a Form 5471 every year, with hefty late-filing penalties of its own, and possibly current US tax on the company's undistributed profits under GILTI (renamed "net CFC tested income" for tax years beginning after 2025). Elections and the high-tax exception can soften that, but they need modelling, and salary, dividends and retained earnings are taxed on different timetables in each country.
Canadian small-business planning can partly or fully unwind at the US level, so talk to us before you incorporate or restructure, not after. Form 5471 preparation is from $450 per form; get in touch to go through your setup.
Living in Quebec? You file a TP-1 too
Quebec runs its own provincial income tax, so Quebec residents file a TP-1 with Revenu Québec on top of the federal T1, and pay into the QPP instead of the CPP. On your US return, Quebec tax counts as foreign income tax for the credit, right alongside the federal tax.
Do you still owe your old US state?
Moving to Canada doesn't automatically end your ties to the last state you lived in. California, New York, Virginia, New Mexico and South Carolina in particular can keep treating you as a resident if you hold on to a home, a driver's licence, voter registration or other clear ties. California is the worst of them for Americans in Canada: it doesn't recognise the FEIE and gives no credit for Canadian tax. Our state tax guide covers how to leave cleanly. If you do need a state return, it's $75 per additional state on top of the Expat return.
Behind on US filing? Catching up from Canada
A lot of Americans in Canada, especially people born in the US to Canadian parents, find out about all this years late. If the failure to file wasn't willful, the Streamlined Foreign Offshore Procedures are usually the way back in. You file:
- the last 3 years of US tax returns,
- the last 6 years of FBARs, and
- a certification of non-willful conduct on Form 14653.
If you meet the non-residency test, which anyone who's lived in Canada for years normally does, there's no penalty. And because of the foreign tax credit, most people in Canada owe little or nothing on the catch-up returns.
Get your Social Security number first
A US citizen can't file with an ITIN. You need a Social Security number, and many accidental Americans have never had one. From Canada you apply through the US embassy or a consulate, and it can take a while, so start there.
Our Streamlined guide walks through the whole process, and our Streamlined package is from $1,500 for the three returns and six FBARs.
Green-card holders living in Canada
Your green card keeps you a US tax resident until it's formally abandoned or revoked, even if you've moved to Canada for good. You may be able to claim Canadian residence under the treaty's tie-breaker rules, but if you've held the card in at least 8 of the last 15 years, doing that or giving up the card can trigger the US expatriation rules. Get advice before you do either.
What we'll do for you
Our Expat return, $275, covers your Form 1040 with the foreign tax credit or FEIE, the FBAR and Form 8938. It's prepared by Enrolled Agents who work with T1 figures, RRSPs and TFSAs every season, so you won't be explaining what a RRIF is. Returns with PFICs, equity compensation or K-1s go under Premier at $475. See the full pricing or how filing with us works.