Are My RRSP Contributions Deductible in the USA?
A while back, we published a
newsletter on deducting 401(K) contributions for purposes of Canadian taxation.
Now we turn our attention to whether or not contributions to an RRSP are
deductible for purposes of US taxation.
Praneil is a dual
US-Canadian citizen who has been living and working in Canada for over 5 years.
As a result, Praneil files a Canadian tax return because he is a tax resident of
Canada and he also files a 1040 return because he is a US citizen residing
If Praneil makes a deductible
contribution to a RRSP on his Canadian tax return, then will this contribution
also be deductible on his US tax return? Generally, an RRSP contribution is not
deductible on a US tax return.
There is, however, an exception
under the Canada-US tax treaty that allows a RRSP deduction in certain
situations. In particular, if the RRSP contribution is made via employee
contributions to an employer sponsored group RRSP plan, then the contribution is
deductible on the US tax return.
But there is a limit on how much
you can contribute. Specifically, the RRSP contribution is limited to the lower
of your RRSP deduction limit in Canada or your 401(K) limit (currently at
$17,000 for those under the age of 50).
In addition, you will need to
notify the IRS that you are lowering your taxable wages by the RRSP
contribution. You do this by filing a Form 8833 with your US return and claiming
an exemption under the tax treaty.
At Gedeon Law & CPA, we are
here to assist residents on both sides of the border with filing tax returns in
Gedeon Law & CPA
Professional Law & Accountancy Corporation
5155 W. Rosecrans Ave, Suite
Hawthorne, CA 90250
Office: (424) 254
Fax: (310) 602 6409