The United States does not recognize an RRSP or a RRIF as a
qualified pension plan, and thus there is no Code deduction for a
contribution to such a plan. Moreover, earnings accumulated in an
RRSP or a RRIF are not tax-deferred: annual RRSP and RRIF income is
taxable even if it is not distributed. Article XVIII(7) of the
Canada-US treaty allows a US person to seek a deferral of US income
tax against accumulating earnings, but the new net investment
income tax (NIIT) may apply to distributions.
From 2004 to October 6, 2014, a US person in Canada was required
to attach IRS form 8891 ("U.S. Information Return for
Beneficiaries of Certain Canadian Registered Retirement
Plans") to his or her return in order to qualify under the
article XVIII(7) exemption from income taxation on accumulating
earnings. From October 7, 2014, form 8891 is not required to
be attached to form 1040, and a US person who holds an RRSP or a
RRIF now automatically qualifies for an income tax deferral similar
to the deferral for a participant in a US IRA or 401(k) plan. This
treatment is available only to a US person who has filed and
continues to file a US return for any year in which he or she held
an RRSP or a RRIF interest and who included distributions as income
on his or her US income tax return.
By deferring US tax until a distribution is made, a US person
can claim a foreign tax credit for Canadian income tax paid against
his or her US income tax. However, starting after calendar 2012, a
distribution from an RRSP or a RRIF held by a US person is subject
to the NIIT of 3.8 percent. The NIIT cannot be offset with a
foreign tax credit for Canadian income tax paid on the
distribution. Qualified pension plans are NIIT-exempt under Code
section 1411(c) (5), which exempts any distribution from a
qualified plan and arrangement set out in Code section 401(a).
RRSPs and RRIFs are not qualified plans or arrangements for these
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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