Canadians Living in the US: Residency, TN and H-1B Moves, RRSPs and Filing

Canadians living in the US move between two tax systems with different residency rules, different year-ends for some purposes and very different treatment of registered accounts. The move usually triggers three events at once: a Canadian departure that can create a deemed sale of investments, the start of U.S. tax residency, and new U.S. reporting for everything you leave behind in Canada. Getting the sequence right before you cross the border saves more than any deduction you could find afterward. This guide follows a Canadian citizen moving to Illinois or elsewhere on a TN, H-1B or similar work status.

Do Canadians living in the US become U.S. tax residents?

Usually yes, once the stay is more than short. You are a U.S. resident for tax if you hold a green card or meet the substantial presence test. The test counts all days in the current year, one-third of the days in the prior year and one-sixth of the days two years back, and needs at least 31 days in the current year and 183 weighted days in total. Days you commute to work in the United States from Canada do not count. See U.S. tax residency tests for the full rules and exempt categories.

A Canadian who keeps a home in Canada can end up resident in both countries. The treaty tie-breaker in the US Canada tax treaty guide then decides, and a dual-resident files Form 8833. Short stays for the winter are a different case, covered in the snowbird guide.

What visa is involved?

Canadian citizens can seek TN status at a designated port of entry or pre-clearance station without a visa from a U.S. consulate. USCIS lists proof of citizenship, an employer letter and a credentials evaluation if applicable. The initial stay is up to three years, extendable. A spouse and unmarried children under 21 may qualify for TD status, which allows study but not work. H-1B, L-1 and other categories are sponsored by the employer. Immigration status is a legal question for an immigration lawyer; our role is the tax effect of the move.

How do you end Canadian residency and plan the move?

1. Decide the departure date. The CRA says you generally become a non-resident on the latest of the date you leave, the date your spouse or common-law partner and dependants leave, and the date you become resident of the new country. Sever or reduce ties: sell or lease the home, move the family, cancel the provincial health card at the right time, close or retitle accounts where practical.
2. Value your property. Most non-registered property is treated as sold at fair market value on departure. Exempt property includes RRSPs, RRIFs, TFSAs, RESPs, Canadian real property and certain business property.
3. File Form T1161 with the return if the total value of your property was more than C$25,000 when you left. Late filing carries a $25-per-day penalty with a $100 minimum and $2,500 maximum.
4. Report any gain on Form T1243 and Schedule 3, or defer the tax by electing on Form T1244 by April 30 of the year after you leave, with security required if the federal tax owing is more than C$16,500.
5. File your final Canadian return showing the departure date and world income to that date. Moving expenses are generally not deductible for a move out of Canada.
6. Notify payers and banks that you are no longer resident, and stop Canada Child Benefit and similar payments.
7. Plan the registered accounts, as discussed below.

Documents and information you need

• Passport, TN or other approval documents, and the employer offer letter
• A dated list of property with fair market values on departure day
• Statements and cost bases for non-registered investments
• RRSP, TFSA, RESP and pension statements
• Proof that ties were severed (lease or sale documents, address changes)
• Your first U.S. SSN (see SSN and ITIN) and first payroll withholding forms

What happens to your RRSP, TFSA and Canadian funds?

The RRSP can stay. For U.S. purposes, the treaty election under Article XVIII(7), applied automatically by Revenue Procedure 2014-55, defers U.S. tax on RRSP growth until withdrawal, and no Form 8891 is needed. The RRSP is still an FBAR and Form 8938 item. A withdrawal as a non-resident faces Canada's default 25% Part XIII tax on a lump sum, while a periodic pension payment can fall to the treaty's 15% cap; see non-resident tax in Canada.

A TFSA can stay in Canada but you cannot contribute once non-resident, and the CRA says room does not grow. The U.S. does not recognize its tax-free status, so many Canadians withdraw or restructure it before becoming U.S. resident; decide with your Canadian CPA. Details are in the RRSP, RRIF, TFSA and RESP guide. Canadian mutual funds and ETFs generally become PFICs once you are a U.S. resident; see Canadian funds and PFIC.

Deadlines, thresholds and penalties

The U.S. individual return for 2025 was due April 15, 2026. Foreign account reporting applies from your first U.S. resident year: the FBAR is required when the combined foreign accounts exceeded $10,000 at any time and is due April 15 with an automatic extension to October 15. Form 8938 for people living in the United States starts at more than $50,000 on the last day of the year or $75,000 at any time for a single filer, and $100,000 and $150,000 for joint filers. Failing to file Form 8938 can cost $10,000, with additional amounts after notice. The Canadian departure filings are due with the final T1, April 30 of the following year, or June 15 if self-employed.

Worked example

Chloe, a Canadian citizen and software engineer from Calgary, starts a TN job in Naperville on June 1, 2026, with her spouse following in August. She sells their Calgary home in July. She owns non-registered shares worth C$90,000 with a cost of C$60,000, an RRSP, and a TFSA. Her 214 days in the United States in 2026 meet the substantial presence test, so her residency starting date is June 1, 2026 and 2026 is a part-year U.S. return. In Canada the shares are treated as sold on departure, a C$30,000 gain she may report or defer with Form T1244, and the T1161 list is required because her property exceeds C$25,000. The RRSP and TFSA are exempt from the deemed sale. These numbers are hypothetical. Illinois residents also file a state return; see Illinois income tax.

Mistakes to avoid

• Keeping a Canadian home, provincial health card or driver's licence while believing you have left; secondary ties can keep you a Canadian resident.
• Skipping Form T1161 because "everything is registered".
• Leaving a TFSA in place and not reporting it in the United States.
• Buying Canadian mutual funds after the move.
• Overlooking a Canadian employer pension, which can also be reportable on Form 8938.
• Missing coverage rules: a worker sent temporarily by a Canadian employer may stay under CPP with a certificate; see the Canada-U.S. social security agreement.

How we can help

We are a U.S. CPA firm in the Aurora and Fox Valley area and we work with Canadians relocating to Illinois and nearby states. We handle the U.S. side, including the first-year return, state filings and foreign account reporting, and we coordinate with your Canadian CPA for the departure return and Form T1161. See relocation and immigration tax planning, individual returns for newcomers and the cross-border hub.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.