# US citizen in Canada, general



## cwd (11 mo ago)

I'm a Canadian citizen but a U.S. Permanent Resident living in the U.S. I can apply for American citizenship now and hold dual. 
I would like to move back to Canada for family reasons, but keep the option open to return to the USA someday (where I've lived a significant part of my life).

I've read about the tax requirements, and understand them generally as: "You won't be double taxed, but are not privy to tax shelters like the TFSA." Of course that's a generalization, and one must consult an accountant etc (I have).

I'm wondering about any significant burdens (tax or otherwise) with holding US citizenship but living in Canada, from the experiences of those here. An accountant was only really helpful to tell me what applies to me right now. But life changes. I'd like to someday own property, own a business, have kids,..

Thanks!


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## Nononymous (Jul 12, 2011)

There's an important distinction to be made here. There are no burdens to living in Canada as a US citizen, per se. However, as you point out, there are burdens to filing US tax returns while living in Canada. The vast majority of dual citizens in Canada file nothing and are perfectly safe doing so. However, if you have possible plans to return, US assets, and other complications, then it may be in your interest to stay in touch with the IRS.

For a tax-compliant dual citizen in Canada, the problem isn't that you are not allowed to do things other Canadians do - thankfully this is a better situation that in many other countries - but that you will face onerous US reporting burdens and/or lose tax advantages. Even if you declare your US citizenship to them, your bank will allow you to open a TFSA. Under the FATCA rules those accounts aren't even reported, so the IRS won't hear about it from anyone but you. However, if you report the TFSA on your US return, the gains are taxable. Similarly, a Canadian bank will allow you to invest in mutual funds, but the IRS would require potentially complex PFIC reporting. There's a list of potential problem areas, including self-employment and home ownership (capital gains on a primary residence are taxable in the US, beyond an in initial exemption).

You have three options:

1. Return to Canada as a US citizen, and do everything by the book. You will likely be constrained in your ability to invest and if things get complex, you'll have a lot of paperwork to do, and/or accounting costs.

2. Return to Canada as a US citizen but fly under the radar. Don't tell banks about your US citizenship, so that nothing is subject to FATCA reporting. File nothing or minimal returns that exclude problematic investments. There's no risk to you in Canada, but if you have US assets or are serious about returning, potentially not a good plan.

3. Don't become a US citizen - you can always move back later under some other scheme. However, be aware that leaving after having had a green card for too long can result in a punitive exit tax. And remember that even with citizenship, it's not necessarily easy to retire to the US if you can't get sensible health insurance.


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## cwd (11 mo ago)

Nononymous said:


> There's an important distinction to be made here. There are no burdens to living in Canada as a US citizen, per se. However, as you point out, there are burdens to filing US tax returns while living in Canada. The vast majority of dual citizens in Canada file nothing and are perfectly safe doing so. However, if you have possible plans to return, US assets, and other complications, then it may be in your interest to stay in touch with the IRS.
> 
> For a tax-compliant dual citizen in Canada, the problem isn't that you are not allowed to do things other Canadians do - thankfully this is a better situation that in many other countries - but that you will face onerous US reporting burdens and/or lose tax advantages. Even if you declare your US citizenship to them, your bank will allow you to open a TFSA. Under the FATCA rules those accounts aren't even reported, so the IRS won't hear about it from anyone but you. However, if you report the TFSA on your US return, the gains are taxable. Similarly, a Canadian bank will allow you to invest in mutual funds, but the IRS would require potentially complex PFIC reporting. There's a list of potential problem areas, including self-employment and home ownership (capital gains on a primary residence are taxable in the US, beyond an in initial exemption).
> 
> ...


Thank you very much, you put it quite clearly. 
Never considered option 2, figured it would make even crossing the border difficult.

I'm aware of the exit tax, and am approaching the triggering point so that has been motivating this thinking.
Interesting point about health insurance in retirement. I figured it was in the ballpark of $1000/mo, which is easily squeezed out of the generally lower US taxes.

There's a huge emotional component to this decision which ain't easy. Practically, I wanted to protect my ability to easily move back (I love so many US cities) without the years of the visa rigamarole and restricted employment options (large firms willing to sponsor). Hard to predict years into the future what one will want, so sizing the burden for being tax-compliant for the rest of my life.. it's feeling steep. Perhaps moving back as a non-citizen isn't off the table.


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## Nononymous (Jul 12, 2011)

Border crossing is not an issue (unless the idiot "truckers" are still parked in the middle of the highway). US customs has no ability to check tax status. You literally need to be in so much trouble with the IRS that there's a warrant for your arrest, otherwise you sail on through. Where you don't want to cross Uncle Sam is doing something stupid that will jeopardize US assets or future Social Security payments. However, the IRS is overwhelmed and has very limited ability to obtain information outside the country, so some version of option 2 is entirely feasible, especially if you're willing to lie to Canadian banks.

I have no idea what the true costs of health insurance would be, late in life. Don't overestimate the tax savings, by the way. People commonly assume that you save thousands each month living in the US, but by all accounts that's not true. Do some serious number-crunching before you make a decision. You can always renounce US citizenship again if you find it too onerous and change your mind about returning.


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## 255 (Sep 8, 2018)

@cwd & @Nononymous -- Medical care, in the U.S., for retirees is not nearly as expensive as $1,000.00 for a retiree that has qualified for Medicare (40 quarters of work history, basically 10 years.) There is no charge for Medicare Part A (hospitalization) and the base rate for Part B is currently $170.10 a month (higher income earners can pay a higher rate.) The cost of an optional Medicare Supplement (or Medicare Advantage Plan) could double that, but not much more.

The real hiccup arises with custodial care -- which is not covered. Short term skilled care in a nursing home is covered, but not custodial care. Washington state recently passed a law requiring "long-term care insurance" for workers in that state (LTC ins. becomes very expensive, the older you are.) Personally, my wife and I are considering Mexico, if we live that long.

I actually have an acquaintance that retired to Canada, near the U.S. border and has returned to the U.S. for some medical procedures in the U.S. (by maintaining his Medicare Part B) to escape some of the wait times for "free" care in Canada. Of course this was pre-pandemic. Cheers, 255


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## 255 (Sep 8, 2018)

@cwd & @Nononymous -- I forgot to mention prescription drugs; unfortunately, they aren't covered under Medicare Part A or B and an additional drug plan (Medicare Part D) may make sense. There are discount plans, discount cards and quite frankly many Americans utilize Canadian online pharmacies, if costs are high. Some supplemental and Medicare Advantage (Part C) plans may cover drugs. Cheers, 255


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