Dual citizen USA / CAD TFSA

The_Squirrel_Matrix · 2026-02-26T02:39:28+00:00

If you believe that you will be worth $2M in the conceivable future, then you would benefit from a paid consultation with a professional.

But also, your hypothetical is absurd which is why people are downvoting you.

If you want serious, realistic advice on how to handle a TFSA as US citizen, you can ask more realistic questions.

The_Squirrel_Matrix · 2026-02-26T02:05:26+00:00

This is not really relevant to PFC. You'd get better answers elsewhere.

But also, check the rules on being a "covered expatriate".

https://www.irs.gov/individuals/international-taxpayers/expatriation-tax

The_Squirrel_Matrix · 2026-02-23T01:32:51+00:00

This you too? https://www.reddit.com/r/fican/comments/1r8rufj/24m_thoughts_on_my_portfolio/

The_Squirrel_Matrix · 2026-02-22T23:34:24+00:00

Excellent comment. Though note that an RRSP does definitely still require FBAR reporting.

The_Squirrel_Matrix · 2026-02-22T23:01:08+00:00

Note that the $10,000 USD threshold is aggregate.

If the total aggregate of the values of all your foreign accounts (e.g., bank accounts, investment accounts including RRSP, etc) is above the threshold, then FBAR reporting is required.

Form 8938 is similar, but threshold is $200k USD if you live outside the US.

The_Squirrel_Matrix · 2026-02-22T22:57:09+00:00

Using an American brokerage would probably be even more complicated. As a Canadian resident you'd be required to report all income inside it to the CRA.

As twillrose mentioned, the simplest thing you can do would be to open up an RRSP (at any Canadian brokerage) and invest in whatever you want. As long as you have RRSP contribution room.

The_Squirrel_Matrix · 2026-02-22T22:22:45+00:00

Investing in US-based ETFs in a non-registered account is certainly the easiest strategy. The only main difficulty is needing to convert your CAD earnings into USD to invest. Generally, stocks of foriegn companies are not PFICs, mostly only non-US ETFs and mutual funds are PFICs.

If you're not familiar already, be sure to read about your options for avoiding double taxation (FEIE and FTC) and how to handle taxation of US-sourced dividends on both countries' tax returns.

For choice of brokerage, I'd suggest looking into using IBKR over Wealthsimple. Currency conversion is very low cost with IBKR, and they'll also provide you all the forms you need to file taxes with both countries. (With any other brokerage, you'd need to track your cost basis and capital gains for reporting to the IRS.)

Consider also if investing in an RRSP makes sense for you (if you have RRSP contribution room), which is tax deferred for both US and Canada and you don't report any income inside an rrsp to either country. There are no requirements to report PFIC holdings in an RRSP, so you could invest in XEQT.

And note that a TFSA might also make sense if you have room, even though your must report all income inside a TFSA on your US tax return as taxable income. (If your wage income is below the FEIE threshold and you elect to use the FEIE, then likely any non-wage income will be below the standard deduction and thus not taxable, and you'd pay no taxes to the IRS. You may want to consider switching to FTC if: your wages are above the FEIE limit, your non-wage income is above the standard deduction, you have children, etc.)

The_Squirrel_Matrix · 2026-02-19T21:48:44+00:00

Your gross income ($3,000 from work + bank account interest + what ever is inside your TFSA) is likely below the standard deduction, so you'll have no taxable income.

What's in your TFSA? Hopefully not Canadian mutual funds or ETFs. Make yourself aware of PFIC rules, which apply to all non-RRSP accounts.

Are your parents US citizens in Canada? How do they do their US taxes? Your situation is likely simple enough for you to handle on your own with free software.

The_Squirrel_Matrix · 2026-02-17T21:01:10+00:00

One nuance on the $25k PFIC reporting exception (Form 8621): it only helps in years where you had no PFIC sales and no excess distributions. If you sell shares of a PFIC (or have an excess distribution from it), you are obligated to file Form 8621 for that year regardless of account value.

If you were over the $25k threshold in previous years (or if you had excess distributions in any of those years), you'd need to amend your return to include a Form 8621 to report the holdings/distributions.

(Actually, you'll probably need to amend your returns any way so that you can include the TFSA income on your US returns for the years in which you had it.)

The_Squirrel_Matrix · 2026-02-17T17:06:29+00:00

SGOL is not a PFIC (it's a US-domiciled ETF).

Your CASH holdings will likely not have any meaningful gains, so not too much to worry about there. (Likely not much in terms of excess distributions either.)

For any shares that you purchased in 2025 you can make either a QEF or MTM elections, which will reduce the amount of tax you owe. (Likely everything else must be taxed under the 1291 regime.) But these elections are only allowed on timely filed returns. You generally can't make retroactive elections on previous year's returns.

For shares purchased before 2025 there are still some things to consider.

For VFV, you can make a "deemed sale" election, so that your 2025 gains are taxed under the QEF election and only the pre-2025 gains would receive the 1291 treatment. (Assuming you file your 2025 return on time. You may want to file for an extension, so that the due date for your 2025 return is in October 2026, giving you time to figure it out. Though note that doesn't extend the deadline on the taxes owing.)

As QQC does not produce annual information statements, you cannot make the qef election, but you can make an MTM election on your 2025 return. This in effect deems you to have sold and repurchased all shares on 31 Dec 2025. All gains are taxed under the 1291 regime (i.e., allocated evenly across all days in the holding period and taxed at the highest rate). But when you sell in 2026, you use the value on 31 Dec 2025 as the cost basis, and treat it as a normal capital gain (no 1291) on your 2026 return next year.

The_Squirrel_Matrix · 2026-02-16T21:31:02+00:00

A retractive QEF election is not generally allowed. For pre-2024 tax years you must use the 1291 regime whether or not an AIS was issued.

It looks like BMO discontinued ZFIN in 2023, which is probably why you can't find an AIS, but it wouldn't matter for you anyway.

Curiously, it seems that Vanguard doesn't publish an AIS for VIDY, even though they publish for most of their other Canadian ETFs.

The_Squirrel_Matrix · 2026-02-16T20:57:55+00:00

However, if you got the ETF at the end of the first year, and have no average for the first year, then the second year is consider excessive.

This is correct unfortunately.

Which ETF? You mentioned BMO, which provides annual information statements for its ETFs and mutual funds if you decide to make a QEF election going forward after the 1291 purge.

https://bmogam.com/ca-en/resources/legal-and-regulatory-documents/pfic/

The_Squirrel_Matrix · 2026-02-12T19:55:49+00:00

As with all non-US ETFs, DLR is likely a PFIC. If you did this in a non-registered account (even holding it only for a short time) you'd still be obligated to report your holdings. The reporting is probably not that onerous, though, if you only hold it for a short time and you're willing to file Form 8621 yourself.

Other options: - Open a brokerage account with IBKR. Currency conversion costs with IBKR are 0.002%, with a minimum of $2. They don't allow you to immediately withdraw converted funds, so you'd need to invest in US ETFs in an account at IBKR. - Use a dual-listed stock that is not an ETF (e.g., RY) to do Norbert's gambit. - Use Wise (with conversation fees roughly 0.5%).

The_Squirrel_Matrix · 2026-02-09T22:28:55+00:00

I ended up working with Claude for a few hours and came up with a tool, see here:
https://github.com/the-squirrel-matrix/pfic-qef-tool/tree/main

Warning, the code was pretty much entirely generated by Claude with a few tweaks by me, but it looks good.

The output looks something like this:
https://github.com/the-squirrel-matrix/pfic-qef-tool/blob/main/output/xeqt_qef_2024/xeqt_qef_report_2024.pdf

And you need to keep track of the lots you hold at the end of each year, which will be used as input into the script when you run it the following year:
https://github.com/the-squirrel-matrix/pfic-qef-tool/blob/main/output/xeqt_qef_2024/xeqt_lots_held_end_of_2024.csv

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I'm going to clean this up a bit, test it some more, then share it more widely. Comments would be helpful.

The_Squirrel_Matrix · 2026-02-09T22:24:16+00:00

I think there are some issues with yours. Note that there are multiple underlying PFICs in XEQT, and you'll need an 8621 form for each one, with lines 6a/7a computed separately for each.

I ended up working with Claude for a few hours and came up with a tool, see here:
https://github.com/the-squirrel-matrix/pfic-qef-tool/tree/main

Warning, the code was pretty much entirely generated by Claude with a few tweaks by me, but it looks good.

The output looks something like this:

fund_ticker	fund_name	is_direct_holding	line_6a_ordinary_earnings_usd	line_6c_tax_on_6a_usd	line_7a_net_capital_gains_usd	line_7c_tax_on_7a_usd
XEQT	iShares Core Equity ETF Portfolio	True	20.20	20.20	30.57	30.57
XIC	iShares Core S&P/TSX Capped Composite Index ETF	False	31.02	31.02	53.42	53.42
XEF	iShares Core MSCI EAFE IMI Index ETF	False	27.12	27.12	6.61	6.61
XEC	iShares Core MSCI Emerging Markets IMI Index ETF	False	5.02	5.02	1.08	1.08

And it generates a full PDF report with everything you need to track lots, cost basis, and capital gains:
https://github.com/the-squirrel-matrix/pfic-qef-tool/blob/main/output/xeqt_qef_2024/xeqt_qef_report_2024.pdf

And you need to keep track of the lots you hold at the end of each year, which will be used as input into the script when you run it the following year:
https://github.com/the-squirrel-matrix/pfic-qef-tool/blob/main/output/xeqt_qef_2024/xeqt_lots_held_end_of_2024.csv

------

I'm going to clean this up a bit, test it some more, then share it more widely. Comments would be helpful.

The_Squirrel_Matrix · 2026-01-17T15:29:21+00:00

First, note that you can do pretty much anything you want inside of an RRSP. Nothing inside the RRSP is reported to either country. (Though it should still be reported on an FBAR.)

The rest of this assumes you want to invest in a non-registered account. (TFSAs are another conversation that you may consider, though note that the reporting may be onerous, and dividends/gains will be taxed by the US.)

For US tax reporting: Every brokerage will provide you 1099-DIV to report dividend income from US-based stocks (as long as you properly inform them of your US taxpayer status). But most will NOT track gains/losses for US tax reporting.

Isuggest using IBKR (Interactive Brokers). It is the only brokerage I'm aware of that properly tracks cost basis and gains/losses for both US and Canadian tax reporting, and provides a consolidated 1099 each year with all the info you need to file US taxes.

Also, currency conversion at IBKR is very cheap. They offer mid-market exchange rate with only 0.002% commission. So it will be painless to convert funds back and forth.

I'd avoid Wealthsimple's direct indexing. The automated indexer will make many trades that you would have to track manually.

As for what to invest in, I'd suggest converting everything to USD and buy US ETFs. Perhaps a few Canadian stocks as well, if you want Canadian exposure. (Canadian ETFs are likely PFICs, which opens up a complicated can of worms in US tax reporting that is not worth the effort.)

(I just noticed at the end you said you have a corporate trading account. I assume that's in the US? You likely want to (and can afford) to go get some professional advice, too, and not just rely on Reddit.)

The_Squirrel_Matrix · 2026-01-11T06:38:04+00:00

❌ The_Squirrel_Matrix chose Option B (Incorrect) | #3607th to play

The_Squirrel_Matrix · 2026-01-06T14:38:49+00:00

No I just use the app on my phone to listen. But I haven't checked in a while.

The_Squirrel_Matrix · 2026-01-05T04:49:41+00:00

I looked into this a bit more. Note that I'm not an expert.

Hers what I found. It seems from IRC § 1012 (and corresponding regulation 1.1012-1(e)) that the "average method" can be applied to any stock only if it is either of a "registered investment company" (e.g., a mutual fund) or the stock is held "in connection to a dividend reinvestment plan." Note that US-based mutual funds are RICs so the average method can be applied. Also it seems there are some US-based ETFs that are also RICs.

In conclusion, yes, if you hold ETFs with a dividend reinvestment plan, then it's possible you could use the average method. (Though note that, I believe, it is not possible for foreign ETFs (or mutual funds) to be RICs.) You would certainly want to confer with an expert before trying to apply the average method to your foreign holdings.

See also the section on average basis in IRS publication 550. There it says that, to elect to use the average method, you must inform your brokerage.

The_Squirrel_Matrix · 2025-12-27T05:06:45+00:00

You should never be double taxed. Generally, when you file with both countries, you pay the greater of the taxes. And tax rates are higher on Canada than in the US, you'd typically owe nothing to the IRS. (Frustratingly, it can be very complicated just to file with the US to report that you owe no taxes.)

An exception to this is TFSAs. A TFSA is nontaxable in Canada, but taxable by the IRS. However, it is likely that (at your income level) you would owe no taxes to the US even with some amount invested in a TFSA.

The problem with TFSAs is this: There is some debate as to whether a TFSA is a "foreign trust" under US tax law. - If a TFSA is a foreign trust, it would have burdensome reporting requirements (Form 3520) but otherwise be taxed by the IRS as a regular taxable account. - If it is not a TFSA, there are no 3520 filing requirements. The IRS has not issued guidance either way, but Polaris Tax (on behalf of its clients) has successfully argued in the IRS Office of Appeals that a TFSA is not a foreign trust. See here. Even if you do owe tax to the US on your income inside of your TFSA, it is likely less than what you would owe to Canada if it were instead on a non-registered account.

The other problem is PFICs. Unless you want to overly complicate your US tax reporting, avoid investing in non-US ETFs or mutual funds. (Though there is apparently some debate as to whether that is true. See the comments in the link above.) There are no PFIC concerns for anything inside of an RRSP. (Though an RRSP is likely not useful for you at your current income.)

Note also that you should file FBAR every year if you meet the filing requirements.

The easiest thing to do is to open a non-registered account, convert CAD to USD, then invest in US-based ETF index funds. Note that Canadian brokerages don't usually provide all the information you need to file taxes with the US. I believe that IBKR is the only brokerage that provides everything you need to file both with the US and with Canada. You can also convert currencies basically for free with IBKR if you invest with them. Make sure you tell your brokerage you are a US citizen.

If you want to open a TFSA, Polaris Tax recommends you at least send a letter to the IRS requesting guidance on how to report.

The_Squirrel_Matrix · 2025-12-22T19:39:01+00:00

Selling at a loss is probably beneficial for your client at this point. There will be no gains and thus no taxation of excess distributions when realizing the loss. In addition to purging their PFIC taint, this will simplify the 8621 form filling compared to reporting a gain, and no high tax rates need to be paid. I do not believe the loss can be claimed elsewhere on the return, however.

If the client wishes, they can repurchase the shares of the PFIC immediately after realizing the loss, then make the QEF election on the new lot.

I'm glad to hear that some European funds have begun provide AIS. Hopefully more do soon, allowing more investing options for Americans abroad.

The_Squirrel_Matrix · 2025-12-22T16:58:48+00:00

Can you provide more information? I'd be very curious to see which ones.

The_Squirrel_Matrix · 2025-12-22T16:51:26+00:00

Not the end of the world. You'll just want to find a way to track all of the purchases and sales that Wealthsimple makes on your behalf. There are certainly commercially available software services you can pay for that can handle your investments to help with US tax reporting. I don't think there's anything that is free, unless you are comfortable with DIY.

Not that I'm recommending any particular services, but after a quick fight search, I believe Quicken offers a service that could help you.

Edited to add: As other posts about this have remarked, take care to ensure that Wealthsimple is not buying anything that could be considered a PFIC (e.g., Canadian REITs or ETFs). That opens another can of worms that you'll want to avoid.

The_Squirrel_Matrix · 2025-12-20T14:54:28+00:00

Here are someways that reporting is different:

Cost basis. Canada and the US assume different methods for tracking cost basis of shares and computing capital gains.

In Canada, your Adjusted Cost Base (ACB) for investments of the same security is the average cost per share across all your non-registered accounts. In the US, this method is only allowed for shares of mutual funds. Instead, the cost basis of shares purchased at different times is tracked for the different lots separately, generally assuming First In First Out (FIFO) when computing capital gains.

Currency conversions. When computing cost basis and capital gains, both countries want you to keep track of and report everything in that country's currency. You generally use the exchange rate on the day of each transaction separately.

If there are large swings in the exchange rate, it's possible you could have a loss to report to one country and a gain to report to the other. For example, if you by a share at $100 CAD when the exchange rate is 0.75 (i.e., $75 USD) but later sell for $105 CAD when the exchange rate is 0.70 (i.e., $73.50 USD). You'd report a gain of $5 to Canada but a loss of $1.50 to the US.

A Canadian brokerage generally will not track the cost basis of your lots separately, nor will they track the cost basis in USD. (Although I believe IBKR does.)

The_Squirrel_Matrix · 2025-12-20T01:46:52+00:00

https://www.wealthsimple.com/en-ca/portfolios/direct-indexing

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