# is RRSP a good idea?



## BajaDave (Mar 31, 2013)

I have an RRSP but have a question that makes me wonder if it is a good idea. We all know that RRSP's and IRA' are designed to encourage saving by shifting the income to a point in life where presumably you will make less money and have a lower tax rate. My question is for an American living in Canada does that benefit get wiped out by the way the contribution is taxed differently between the US and Canada.

I understand the growth in an RRSP is tax differed so you have the full benefit of foreign tax credits to eliminate double taxation when you receive those gains. What about the contribution? It appears to me since an RRSP contribution is taxable income in the US you pay taxes on the contribution in the US in the year you make the contribution and in Canada in the year you receive it. Why would i do this ? Am I missing something?


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## Camerish (May 24, 2012)

You may contribute to an RRSP and still have no tax liability in the US. 

I am a dual citizen and I use the Foreign Earned Income Exclusion method, versus the Foreign Tax Credit route, and I would only have a US tax liability if my earnings were above something like $95k. It all depends on your income and the RRSP contribution amount.

The Foreign Tax Credit method can give you tax credits that can be carried forward for 10 years, so there can be benefits to this method depending on what you expect in the future.

Since you'd be paying income tax in Canada upon withdrawing the RRSP you should not be subject to US tax at that time either.


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## Oggy (Jan 25, 2009)

There's an Expat Tax Forum here that might provide more information. Maybe one of the helpful moderators will move this thread there for you. 

Expat Tax - Expat Forum For People Moving Overseas And Living Abroad


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