Canadian and US dual citizens living in Canada typically file two returns each year: a Canadian T1 and a US Form 1040. The foreign tax credit prevents the same income from being taxed twice.
Lou is a tax-preparation tool, not a tax advisor. This article explains how US filing obligations work for dual citizens in Canada. For advice on your specific situation, work with a qualified tax professional.
Canada and the United States both recognize dual citizenship. The IRS does not care which passport you carry. If you are a US citizen, you file a US return every year. Living in Canada does not change that.
This surprises a lot of dual citizens. Some believed their Canadian citizenship removed their US filing obligation. Others knew about it but assumed it only applied to people earning US-source income. Neither is true.
Two returns, same income#
A Canadian and US dual citizen living in Canada typically files two returns each year: a T1 with the CRA and a Form 1040 with the IRS. Both cover the same Canadian income.
That income gets reported twice, but it does not get taxed twice. The foreign tax credit on Form 1116 reduces US tax owed by the amount of Canadian tax already paid on the same income. For most dual citizens with Canadian employment income, Canadian taxes exceed US taxes, so the US bill after credits comes out near zero.
Zero owed is still a return to file.
What goes on the Form 1040#
Employment income from a T4 goes on line 1 of Form 1040, converted to USD at the IRS annual average exchange rate for that year. Investment income from T5 and T3 slips goes on Schedule B. Capital gains from T5008 go on Form 8949 and Schedule D.
Canadian income tax withheld (Box 22 on the T4) is not entered directly on the 1040. It feeds into Form 1116 as a creditable foreign tax. For a full walkthrough of how each T4 box maps to US form lines, see T4 to 1040: what every American in Canada needs to know.
Registered accounts#
Dual citizens in Canada typically hold RRSPs and TFSAs. Both come up on a US return.
An RRSP can be deferred under the US-Canada tax treaty using Form 8833. Without the treaty election, the income inside the RRSP is taxable to the IRS annually. The election allows it to be deferred until withdrawal, matching the Canadian treatment.
A TFSA is treated as a foreign grantor trust under IRS rules. Income inside the account is taxable annually. Form 3520 and Form 3520-A are typically required. For more on how registered accounts appear on a US return, see RRSP, TFSA, and your US tax return: what to know.
FBAR and Form 8938#
Dual citizens with Canadian financial accounts may also have FBAR and FATCA reporting obligations. FBAR (FinCEN 114) is required if the combined value of your foreign accounts exceeded 10,000 USD at any point during the year. Form 8938 has higher thresholds and is filed with the Form 1040.
These are reporting requirements, not taxes.
Where Lou fits#
Lou accepts Canadian T4, T5, T3, T4RSP, T4RIF, and other slips, extracts the data inside your browser, converts amounts to USD at the correct IRS annual average rate, and maps everything to the right form lines.
RRSP treaty elections, TFSA reporting, FBAR worksheets, and the foreign tax credit are all included.
You review every line before you file. No server uploads. No account required. Free to use. You pay when you download the completed forms. 15-day refund if Lou does not work for your situation.
Lou is a tax-preparation tool, not a tax advisor.
https://lou.bigtimedesign.ca