Purchasing Property in USA?

[leonsgal70 3]

How difficult or is it even possible to use an RRSP for a portion of the downpayment for a home in the States? How would we go about having the RRSP transferred to the US?

Lily

[trailmix 77]

If you mean the RRSP home buyers plan, no you can't, you have to be a resident of Canada to do this and you also have to have the house as your principal residence.

I don't know if it is possible to 'transfer' and RRSP to the U.S. - two different countries, two different systems.

[BriCar 0]

There might be penaltys depending on your age for early withdrawl, taxes of course, then the exchange rate changing to US dollars.

Would probably be best left alone till retirement.

If you decide to leave it, a US resident is not allowed make any changes within your own RRSP so make those changes before you leave.

Hope you can swing another way for a down payment. Houses and mortgages are pretty good buys right now and US home mortgage interest is tax deductable.

Good Luck!

Edited March 12, 2010 by BriCar

[Udella&Wiz 325]

There might be penaltys depending on your age for early withdrawl, taxes of course, then the exchange rate changing to US dollars.

Would probably be best left alone till retirement.

If you decide to leave it, a US resident is not allowed make any changes within your own RRSP so make those changes before you leave.

Hope you can swing another way for a down payment. Houses and mortgages are pretty good buys right now and US home mortgage interest is tax deductable.

Good Luck!

Curious where you heard this...not doubting it, just wondering if there's more info I can read up on. I had not heard I couldn't do anything to it. I do know you have to report any foreign RRSPs/ f pension fund-type things to the US government on a yearly basis and include it's value. There's a special form for it and you mail it somewhere in Michigan I think....did it for the first time last year.

[zenaxe 22]

How difficult or is it even possible to use an RRSP for a portion of the downpayment for a home in the States? How would we go about having the RRSP transferred to the US?

Lily

Check the taxes thread in the Canada forum. There are very specific rule around RRSPs....they are a creature of Canada's tax system and don't exist in the USA.. There is, however, a tax treaty between countries and there are ways to keep the RRSP tax free while in the USA. That may be a good option as you'll be taxed lower when you withdraw - I believe it'll be 15%. But in your case, you're wanting to have this money transferred. I believe you'll take a 25% tax hit on it or higher. Again check the tax threads but it's best to speak with a professional accountant to ensure you know exactly what your best options are.

I'm certainly speaking with my accountant when I'm ready to file my taxes.

Good luck.

[trailmix 77]

Actually it's not as simple as that when it comes to taxes zenaxe. The OP won't necessarily take a 25 or 30% tax 'hit' on it if she withdraws it now. Although that is the witholding tax, so she will have the amount withheld initially, she has not told us what her tax bracket will be this year so we don't know what tax she will pay.

Plus we don't even know when she is moving, she could be considered a tax resident in Canada for the year, this year, so will avoid a non-resident tax etc etc etc.

Leonsgal, I would really really strongly recommend that you speak to an RRSP expert, an accountant, someone at your bank that you trust - I would absolutely not make an RRSP financial decision based on what you are going to find posted here as there is a lot of misunderstanding and it could end up costing you a lot of money. Just my opinion.

Edited March 12, 2010 by trailmix

[zenaxe 22]

Actually it's not as simple as that when it comes to taxes zenaxe. The OP won't necessarily take a 25 or 30% tax 'hit' on it if she withdraws it now. Although that is the witholding tax, so she will have the amount withheld initially, she has not told us what her tax bracket will be this year so we don't know what tax she will pay.

Plus we don't even know when she is moving, she could be considered a tax resident in Canada for the year, this year, so will avoid a non-resident tax etc etc etc.

Leonsgal, I would really really strongly recommend that you speak to an RRSP expert, an accountant, someone at your bank that you trust - I would absolutely not make an RRSP financial decision based on what you are going to find posted here as there is a lot of misunderstanding and it could end up costing you a lot of money. Just my opinion.

I agree it's complicated. I did some reading on it and have emailed my accountant. You can leave your RRSP money in Canada and be a resident of the USA. You have to file annually a particular form that advises the US gov't of this money and it's treated much like an IRA but the money remains in Canada; this is because of the tax treaty that exists. There is likely little incentive to park more money into the RRSP once you are a resident of the US because you lose the tax savings benefit of the RRSP. But you can leave it in the great white north until you are ready to withdraw that money. If you take it now, there is the hit and also you have to declare that money as income in the USA because RRSPs don't exit.

Again I agree with Trailmix and maintain my original position that this is best addressed by professional accountants - best to talk to them.

Edited March 12, 2010 by zenaxe

[BriCar 0]

Curious where you heard this...not doubting it, just wondering if there's more info I can read up on. I had not heard I couldn't do anything to it. I do know you have to report any foreign RRSPs/ f pension fund-type things to the US government on a yearly basis and include it's value. There's a special form for it and you mail it somewhere in Michigan I think....did it for the first time last year.

Most definitly about 12 years or so back the Security and Exchange Commission informed the Canadian government that it would take legal action against any institution allowing a RRSP holder to actively manage their account while residing in the US. Your RRSP manager should be able to tell you that.

I have RRSP's at Ethical Funds and Investors Syndicate that I left in Canada when I immigrated in 1989.

I get statements and I can call them and talk but no changes allowed other than outright withdrawals.

The part about reporting it to the US is new to me. Because RRSP's are "sheltered" funds and grow tax free they produce no income or associated taxes until withdrawal when the amount would then have to be reported as income.

Always good to consult with numerous tax and investment professionals before rather than later.

[OBX 51]

Most definitly about 12 years or so back the Security and Exchange Commission informed the Canadian government that it would take legal action against any institution allowing a RRSP holder to actively manage their account while residing in the US. Your RRSP manager should be able to tell you that.

I have RRSP's at Ethical Funds and Investors Syndicate that I left in Canada when I immigrated in 1989.

I get statements and I can call them and talk but no changes allowed other than outright withdrawals.

The part about reporting it to the US is new to me. Because RRSP's are "sheltered" funds and grow tax free they produce no income or associated taxes until withdrawal when the amount would then have to be reported as income.

Always good to consult with numerous tax and investment professionals before rather than later.

I believe it is form 8891.

http://www.irs.gov/pub/irs-pdf/f8891.pdf

[redBlue 1]

How difficult or is it even possible to use an RRSP for a portion of the downpayment for a home in the States? How would we go about having the RRSP transferred to the US?

Lily

These days ,I'm also trying to figure out what I should/should not do about my RRSPs..Talked to my instituions/CRA/banks and read the stuff....

Here are some stuff that I've learned....

There is no such thing called RRSP in US and also you can't transfer your RRSP into IRA(US retirement account).. They are completely two different systems and they do not recognize each other...

You CAN keep your RRSPs in Canada once you become a non-resident.BUT u can't make any changes..Also you will be hit by 25% non-residency tax.This may increase in the future since it did in the past..

Depending on how much you have in ur RRSP .it might be better to withdraw AFTER u become non-resident of CA.If u withdraw before ,u will pay

taxes up to 30% depending on the amount...so you really have to do your own math or perhaps ur accountant.

I've learned some of these stuff hard way,by loosing the money...

good luck

[BriCar 0]

I believe it is form 8891.

http://www.irs.gov/pub/irs-pdf/f8891.pdf

Sure enough!

I was unaware of the 8891. It might be only used for RRSP plan withdrawals by a US resident.?

Don't know but I sent it to my RRSP manager in Vancouver to see what he says. I also asked if the SEC rules have changed recently.

I'm doing my taxes right now so I'll ask my tax guy about the 8891 as well.

Thank You for the info!

[OBX 51]

Sure enough!

I was unaware of the 8891. It might be only used for RRSP plan withdrawals by a US resident.?

Don't know but I sent it to my RRSP manager in Vancouver to see what he says. I also asked if the SEC rules have changed recently.

I'm doing my taxes right now so I'll ask my tax guy about the 8891 as well.

Thank You for the info!

I understood it was required as a reporting measure, regardless of withdrawals. I'm in the midst of dealing with accountants now so we'll see. My head keeps spinning just thinking about taxes this year.

[zenaxe 22]

Most definitly about 12 years or so back the Security and Exchange Commission informed the Canadian government that it would take legal action against any institution allowing a RRSP holder to actively manage their account while residing in the US. Your RRSP manager should be able to tell you that.

I have RRSP's at Ethical Funds and Investors Syndicate that I left in Canada when I immigrated in 1989.

I get statements and I can call them and talk but no changes allowed other than outright withdrawals.

The part about reporting it to the US is new to me. Because RRSP's are "sheltered" funds and grow tax free they produce no income or associated taxes until withdrawal when the amount would then have to be reported as income.

Always good to consult with numerous tax and investment professionals before rather than later.

My adviser says we can talk about the RRSP and investments but I can't initiate changes from the USA - unless I do a transfer of authorization and delegate the authority to make the changes. I intend to have a family member designated accordingly.

[Flames9_RN 358]

One use form 8891 to report to the IRS that you have RRSP's! If ya have them one has to use that form! The IRS won't tax you on them (that is until/// if you withdraw them) BUT I have been told some States may tax you on them even if you just leave them untouched in Canada!

[BriCar 0]

One use form 8891 to report to the IRS that you have RRSP's! If ya have them one has to use that form! The IRS won't tax you on them (that is until/// if you withdraw them) BUT I have been told some States may tax you on them even if you just leave them untouched in Canada!

My understanding on RRSP withdrawals is that tax will be due in Canada according to the residents tax bracket or a non resident flat tax of 25% is withheld by Canada.

Not sure what the US will do with the remaining 75%.

Supposedly there is a reciprocal agreement between the 2 countries to prevent double taxation.

I can't see some states wanting to dig into them though. They are the equivalent of traditional IRAs allowed to grow tax free until withdrawal/ retirement and really they belong to the other country that set up the rules for them.

That said always consult the professionals before not after!