by margento | May 4, 2021

You have probably heard that TFSAs are great tools for saving money and you would not be wrong.  But what happens when you are affected by both sides of the border?  Does the United States treat TFSAs the same way Canada does?  What happens if you are a Canadian living in the US or are a Canadian-US dual citizen?  This article will explore TFSAs, their advantages, and their tax consequences in Canada and the United States.

TFSA Treatment in Canada

Back in 2009 the Government of Canada started the TFSA program so that individuals 18 years of older with a valid social insurance number could start saving money tax-free.  Contributions to a TFSA are not deductible for income tax purposes, however, whether the TFSA be a savings or investment account, income earned in the account would generally be tax-free, even when withdrawn.

There is a limit to how much you can contribute to your TFSA, however your contribution room grows each year.

Canada Revenue Agency has a publication which describes the finer details on their website:  

TFSA Treatment in the United States

While the Government of Canada considers the growth in your TFSA to generally be tax-free, the Internal Revenue Service does not.

If you are a Canadian-US dual citizen who lives in Canada, you are required to report the investment income from your TFSA on your US tax return.  The same applies if you are a Canadian living in the US who is a US resident for tax purposes.

Furthermore, if you are a non-resident of Canada who owns a TFSA, any contributions made while a non-resident is subject to a 1% tax for each month the contribution stays in the account.

To add another layer, should you invest in Canadian mutual funds or ETFs within your TFSA this could trigger a Form 8621 PFIC filing requirement in the US.

To Save or Not to Save?

There is nothing wrong with having a TFSA however it is important to be informed so that you are not hit with any unexpected surprises when it comes time to file your Canadian and US tax returns.  If you are affected by both sides of the border, it is important to speak to a tax professional so you can move forward knowing what to expect.  You can reach out to a tax specialist at and request your free initial consultation today.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.