Tax guides
Guides to rules on both sides of the border and the Canada–US tax treaty, grouped by topic.
A US citizen, resident or company can buy, subject to Investment Canada filings. Before signing, settle the buyer, shares or assets, and funding. A Canadian company that non-residents control is not a Canadian-controlled private corporation, so it gets no small business deduction. It withholds on dividends to you; you file US forms such as Form 5471.
Individuals · Corporations
Tax rules do not bar a Canadian from buying a US business, but settle the purchase type and buyer together before signing. Assets generally give new US tax costs; shares keep the target’s existing costs. An S corporation generally loses S status when a company, or an individual who is not a US citizen or resident, buys its shares.
Individuals · Corporations
Map activities first. Direct sales and branches use the Canadian corporation: it files T2 and, with a US trade or business, Form 1120-F; treaty may limit US tax. A US subsidiary files Form 1120 and pays its own tax; its parent reports the affiliate. A disregarded LLC may require parent Form 1120-F, its own Form 5472, and Canadian affiliate reporting.
Corporations
A Canadian corporation with a US rental gets a US EIN and decides on the net-rent election. With it, the corporation files Form 1120-F yearly; without it, gross rent generally faces 30% tax. The T2 reports the rent either way. On a sale the buyer withholds 15%; the corporation files to settle the tax, and branch tax may apply.
Corporations
Direct ownership generally means a Canadian resident reports US rent and gains in both countries. Joint title changes the analysis when funding and state law support it. A US LLC can create a Canada–US tax mismatch without settling estate exposure. Corporate ownership raises separate tax questions, especially when someone uses the property personally.
Individuals · Corporations
A US client does not by itself require incorporation. The CRA judges employee or contractor status on the working facts; Form CPT1 asks for a ruling. A sole proprietor pays both CPP halves, a one-client corporation can be a personal services business, and an employer abroad has Canadian payroll duties. Expect a W-8BEN (individual) or W-8BEN-E (corporation) request.
Individuals · Self-employed · Corporations
A Canadian corporation may need state authority before operating locally through an office, staff or on-site work. Shipping from Canada or accepting orders there usually does not, by itself, require it. Check each state's rule before starting local work. If registration was required, the corporation can owe back fees and penalties and may have to qualify before suing.
Corporations
A US business can sell into Canada without forming a Canadian company, but Canadian activity may still require tax and business registration. For a US corporation, a branch keeps Canadian operations in that corporation and may face branch tax; a Canadian subsidiary files its own return and may withhold on dividends. Partnerships and LLCs need separate classification checks.
Partnerships · Corporations
If you are not a US citizen or resident and work from Canada with no US office or staff, a Canadian corporation usually fits: under the Canada–US treaty, US federal tax reaches its business profits only through a US permanent establishment. A US corporation fits US operations or investors. A US LLC, taxed differently by each country, risks double tax.
Self-employed · Corporations
A US citizen resident in Canada can own a Canadian corporation, but US tax may arise before payment if it is a controlled foreign corporation. Canadian corporate tax is not automatically the owner's US tax credit. Salary, dividends and retained business or investment income follow different rules, so the T2, T1 and Form 1040 must be reconciled.
Individuals · Corporations
Selling to US customers alone does not require a Canadian corporation to file a US federal income tax return. US business activity can require Form 1120-F even when the Canada–US treaty removes tax because the corporation has no US permanent establishment. A treaty claim may also require Form 8833. US activity, income, withholding and treaty eligibility determine the answer.
Corporations
Canadian residents selling US founder shares report the gain in Canada; the treaty usually leaves no US tax for section 1202 to reduce. If the US can tax you, section 1202 may help but cannot reduce Canada's gain. First check treaty residence, citizenship and moves. A Canadian corporate seller reports gain, cannot claim section 1202, and may elect foreign-affiliate treatment.
Individuals · Corporations
Canadian resident freelancers report US-client fees in Canadian dollars on Form T2125; Quebec residents also file TP-1. Qualifying exports usually have no GST/HST or QST charged, but registrants still file sales-tax returns. Work done entirely in Canada generally creates no US federal filing by itself. US work, other income, or withholding can change that.
Self-employed
Check the company's creation and Canadian work first. The US corporation files Form 1120 and may need Form 5472. A company created only under US law is generally US-resident under the treaty despite Canadian management. Canadian business activity can require a T2. The Canadian shareholder generally files T1134; a corporate shareholder also files its own T2.
Corporations · Individuals
US: the LLC files Form 5472 with a pro forma Form 1120 in any year with related-party transactions, and a US trade or business requires your Form 1040-NR even without taxable income. Canada treats the LLC as a corporation: a Canadian resident filing a T2 if managed from Canada, otherwise a foreign affiliate you report on Form T1134.
Self-employed · Corporations
First confirm the entity's US and Canadian classifications and whether you or your corporation owns it. If the partnership has US business profit, it generally pays withholding on the Canadian partner's share; the partner claims it on Form 1040-NR or 1120-F. In Canada, report partnership income or LLC dividends and affiliate income on the owner's T1 or T2 when required.
Individuals · Partnerships · Corporations
A Canadian corporation claims qualifying US income tax on Schedule 21 of its T2, up to the Canadian federal tax on that US income. Business and non-business credits have separate limits. Unused business credits can carry to other years; qualifying non-business tax may instead be deducted. Treaty-excess withholding calls for a US refund.
Corporations
You or your corporation, whichever had to file, not the US company, owes C$25 a day, up to C$2,500 for each missed T1134, even with no tax due. Knowing or grossly negligent failure costs more. The CRA may cancel a penalty, but voluntary disclosure cannot reach one already assessed, so check CRA letters and choose that route before filing.
Individuals · Self-employed · Corporations
File required years, prioritizing deduction and refund deadlines. To keep most US business deductions, the corporation needs a true, accurate Form 1120-F within 18 months of each due date. If its preceding required return was unfiled, a specified IRS notice can shorten that window. After cutoff, seek a discretionary waiver. Disclose reportable treaty claims; the corporation can owe US$10,000 per failure.
Corporations
No choice is automatically cheaper; compare all three using the same move date and company value. Leaving Canada can trigger tax on your shares even if you keep them, while later dividends can face Canadian withholding and US tax. Moving to Canada, the countries may tax a US LLC or S corporation's income at different times. Closing can trigger tax too.
Individuals · Self-employed · Corporations
Whether the Canadian or US company bills the other, first identify the work, rights or goods, then use arm's-length prices backed by contracts, costs and comparables. The seller reports income; the buyer records its cost. The Canadian company checks T106 and the US company checks Form 5472. Before payment, check withholding: the payer, and sometimes Canadian directors, can owe missed tax.
Corporations
A licence fee for your work is often a treaty royalty, even if Canada taxes it as business income. US tax generally follows where the work is used. With a W-8BEN or W-8BEN-E given before payment, an eligible Canadian resident's copyright (not film or TV), software and patent royalties are 0%, trademark royalties 10%; with none, 30% is generally withheld.
Individuals · Self-employed · Corporations
The buyer generally withholds from the price: nothing on ordinary US shares, 15% of the amount realized on US real property interests, 10% on a partnership-taxed LLC interest. For US tax, a single-member LLC sale is an asset sale. Certificates should reach the buyer before closing. Canada generally taxes the gain; a corporate seller may elect part as a dividend.
Individuals · Corporations
Check the entry and delivery terms: the importer of record owes customs; terms decide whether seller or buyer pays. Low parcel value no longer secures duty-free entry. Record seller-paid duties with inventory or delivery expenses on a T2 or T2125. Importer status alone does not create a permanent establishment; assess US activity and sale source. Export proof governs GST/HST relief.
Corporations · Self-employed
Canadian corporations can seek US-located bank accounts without US companies. An account alone requires neither a US return nor FBAR. Compare the Canadian-dollar cost of reportable foreign property with C$100,000; exclude cash used exclusively in an active business. Quebec corporations also check provincial Form TP-1079.8.BE-V. Banks may request W-8BEN-E. US-citizen signers check non-US accounts separately.
Corporations
A 1099-K or 1042-S from a US platform does not by itself mean a Canadian seller owes US tax; that depends on the income's source, any US business activity and treaty eligibility. First match it to your sales records. Business income is reported in Canada in Canadian dollars; US tax withheld may qualify for a foreign tax credit.
Self-employed · Corporations
Moving to Canada does not itself end an S election. A nonresident alien shareholder ends it, or stops a new one taking effect, from the date the owner's US status changes, and the corporation then pays corporate tax unless the IRS grants relief. An acceptance letter does not cure an ineligible owner. First, list each owner's US status by date.
Corporations · Individuals
Check whether the US tax was actually owed. Ask the payer to correct excess withholding promptly; otherwise, a US nonresident individual generally claims an IRS refund on Form 1040-NR and a Canadian corporation on Form 1120-F. Canada may credit only final US tax on qualifying US-source income, subject to Canadian limits. Form 1042-S alone does not establish that the tax qualifies.
Individuals · Self-employed · Corporations
A Canadian corporation generally checks Corporation on W-8BEN-E line 4, enters its nine-digit business number on line 9b, and signs Part XXX. Complete line 5 and its FATCA part when required; use Part III only for a supported treaty claim. Give a foreign corporation's W-8BEN-E, never a false W-9. If a 1099-NEC arrives in error, ask the payer to correct it.
Corporations
A Canadian business needs a cross-border accountant when US work, a US entity, US-source payments or a US-citizen owner create filings its Canadian preparer cannot assess. US customers alone often need no US return. Start with a written filing review; the accountant then handles returns, related-company reports and coordination. Fees depend on the agreed scope.
Self-employed · Corporations
If the CRA or Quebec refunds or lowers tax you credited on a US return, recalculate affected years. If US tax rises, report it by the change-year return’s due date, with extensions, or pay 5% a month, up to 25%. If no year’s tax changes, Schedule C is enough. After an IRS change, tell the CRA within its reassessment limits.
Individuals
Americans resident in Canada generally file two returns every year: a Canadian return on worldwide income and a US return on the same income. Foreign tax credits prevent most double tax: Canada taxes Canadian income first, and the US credits that tax or excludes earned income up to a limit. Reporting forms such as the FBAR come on top.
Individuals · Self-employed
A CP2000 proposes a tax change and is not a bill: reply by its printed date, 30 days after the notice date, by upload, fax or mail. A balance-due notice asks for payment. A notice of deficiency starts a Tax Court deadline of 90 days, or 150 days if addressed outside the United States; follow its printed date.
Individuals
A US payer generally withholds 30% of an independent Canadian performer's or athlete's gross fee. To lower it, apply for a central withholding agreement at least 45 days before the first event. Form 1040-NR is generally required, even after a loss, and recovers any overpayment. An ITIN is only for those refused a Social Security number.
Individuals · Self-employed
The US taxes income in Canada's registered accounts unless the treaty or US rules say otherwise. RRSP and RRIF income is deferred until withdrawal, usually automatically, with no Form 3520. TFSA income is generally taxable each year. No binding IRS guidance says how TFSAs, FHSAs, RESPs or RDSPs are taxed. All generally count toward the FBAR and Form 8938.
Individuals
A TN visa is not a tax status. US residency follows the substantial presence test; 183 days in one year is not required. If Canada also treats you as resident, the treaty decides: claim Canadian residence on Form 1040-NR with Form 8833, or file Form 1040 or a dual-status return. Canadian residents file a T1 and credit US tax.
Individuals
A Canadian resident selling personally owned US real estate is generally subject to FIRPTA withholding on the gross sale price. File Form 1040-NR to calculate the final US tax and claim excess withholding back. Report the gain in Canadian dollars on your Canadian return, and consider a foreign tax credit for final US tax. State filings may also apply.
Individuals
A Canadian tax resident who directly owns a US rental generally reports its rent and allowable expenses in Canadian dollars with their T1, usually using Form T776. In the US, gross rent generally faces 30% tax unless you elect net-income treatment and file Form 1040-NR. State and local rental taxes depend on the property's location.
Individuals
If your failure was not willful and you meet the non-residency test, the main IRS option is the Streamlined Foreign Offshore Procedures: file the last 3 years of US returns and 6 years of FBARs, sign Form 14653, and pay tax and interest. Done right, the usual penalties are waived unless an audit finds fraud or a willful FBAR violation.
Individuals · Self-employed
Yes. Elect on Form T1244 by April 30 of the year after departure to postpone departure tax until you sell or dispose of the property, even private shares you cannot sell. Tax above the federal threshold also needs adequate security by then; the CRA publishes no list of accepted security. You pay later; returning to Canada can end the deferral.
Individuals
A direct transfer divides an RRSP or RRIF, a transfer incident to divorce an IRA, and a qualified domestic relations order a US employer plan, each under conditions. Cash is taxed to whoever receives it, whatever the settlement says. Check each plan's requirements and cross-border tax before signing; the US result of an RRSP division is unsettled.
Individuals
Yes, if you never receive the money: use a qualified intermediary before closing, identify the replacement within 45 days and receive it within 180 days. The buyer withholds unless a notice or certificate applies. Canada generally still taxes the gain and any capital cost allowance recapture in the sale year, so credits may not align. Receiving all the proceeds first ends the exchange.
Individuals
The executor files the Canadian final T1 (deemed sale, any RRSP) and a US final Form 1040 if income required one. Form 706 is due nine months after death only if worldwide property plus taxable gifts pass the US threshold. The estate pays Canada's tax. The US exclusion does not remove it, and treaty credit needs US estate tax payable.
Individuals
A US citizen or US-domiciled donor giving one person over US$19,000 a year files Form 709 by April 15 after the gift year, even if no tax is due; the donor pays tax only after lifetime gifts pass US$15,000,000. Direct tuition and medical payments are excluded. A Canadian-resident donor is treated as selling gifted shares at market value in Canada.
Individuals
Repay your unpaid Home Buyers' Plan or Lifelong Learning Plan (LLP) balance into your own RRSP within 60 days after you become non-resident and before you file, or it is added to that year's income. If you leave before buying the home, or withdrew LLP funds the year you leave, repay in full to cancel. Cashing out your RRSP repays neither.
Individuals
The estate pays Canadian tax on a parent’s RRSP or RRIF at death, on the final return, unless a spouse or dependent rolls it over; a beneficiary paid from the plan can share liability. A TFSA passes tax-free up to its value at death. US treatment is unsettled: gather statements and slips first; Form 3520 (generally due April 15) or foreign-account reports may apply.
Individuals
A Canadian resident can inherit a US IRA or 401(k), but the provider decides whether to keep or pay it, so ask first. Many non-spouse heirs must empty it by December 31 of the tenth year after death; a spouse has more choices. US withholding starts at 30%; the treaty caps only periodic pension payments at 15%. You generally owe Canadian tax, with possible credit.
Individuals
Canada taxes the account's income and sales; Form T1135 may apply. Give the broker a W-8BEN if you are not a US person, a W-9 if you are a US citizen or green card holder, who also files in the US. The US generally taxes sales only for US persons. Your broker decides whether you can keep or move it.
Individuals
Not telling the CRA does not decide your residency; your dates and ties do, and the treaty tie-breaker settles a dual claim. First fix a provable departure date and match your US returns, then check the Voluntary Disclosures Program before filing late. You may owe a Form T1161 penalty (C$25 a day, up to C$2,500), tax on the departure-year return and benefit repayments.
Individuals
If your US returns reported all income and only forms are missing: file any overdue FBARs first, before IRS contact; attach any required Form 8938 to an amended return; file Forms 3520 and 3520-A separately if your TFSA or RESP is a reportable foreign trust. Penalties fall on you; relief is not automatic. Left-off income may need a streamlined procedure.
Individuals
A Canadian resident whose specified foreign property cost more than C$100,000 at any time in a year generally must file T1135 for that year, even if all US income was reported. The late penalty is up to C$2,500 per missed year, more for knowing failure. First choose between the Voluntary Disclosures Program and late filing with a relief request.
Individuals
China taxes a resident's worldwide income, including overseas rent, interest, dividends and gains, if you keep Chinese domicile or spend 183 days there in a year; without domicile, a six-year exemption may apply. Declare it from March 1 through June 30 of the following year, with credit for foreign tax. Canada may charge departure tax; US exit tax reaches only covered expatriates; US citizens stay taxable.
Individuals
A move may require a Canadian departure return. If you first become a US tax resident in the move year, US worldwide-income reporting generally starts on your residency date; US citizens generally report worldwide income for the full year. Set both residency dates, then check departure tax, treaty rules for investments and your home, registered accounts, and pensions before filing or selling.
Individuals
Canada generally taxes your worldwide income from the date you establish residential ties there. US citizens and continuing green card holders generally still file US returns; other movers may have a final US resident or dual-status return. Record property values on arrival, check state residency, and review retirement accounts and a US home before moving.
Individuals
No binding IRS guidance says whether an RESP is a foreign trust or who is taxed on its growth. A US-citizen subscriber may owe FBAR, Form 8938 and income-tax reporting, and Forms 3520 and 3520-A unless relief applies; a US-citizen child needs separate review. Canada taxes assistance payments to the student. First, gather the plan agreement and funding records.
Individuals
A US citizen in Canada can report different gains on the same sale. Canada generally starts from arrival-date value, works in Canadian dollars, averages identical shares and includes 50% of the gain. The US generally starts from original US-dollar cost, uses identified or oldest shares and counts the full gain. Loss rules differ, so work out each return separately.
Individuals
First, the executor gathers authority papers and worldwide values. File Form 706-NA within nine months if required, even when treaty relief removes tax; the estate pays any US estate tax. Request an IRS transfer certificate when needed, file Canadian and US income returns, and obtain CRA clearance before distributing, plus Quebec clearance where applicable. US heirs check separate reporting.
Individuals
A Canadian resident on a short US nursing or locum contract generally files Form 1040-NR and any state return for pay earned in the US, with tax withheld by the payer. Canada taxes the same pay and credits eligible US tax. W-2 and 1099 pay are withheld differently, and a housing stipend needs its own test in each country.
Individuals · Self-employed
Yes, if your days meet the US substantial presence test: at least 31 days this year and 183 weighted days over three years. A Canadian who meets it may still be a nonresident by filing Form 8840 on time (under 183 days this year, closer ties to Canada) or, for income tax only, by claiming Canadian residence under the treaty.
Individuals
Start with the agreement's signing date. Child support is usually neither taxable nor deductible in Canada or the US, except under some older Canadian orders. Canada taxes qualifying spousal support to the recipient and lets the payer deduct it. The US neither taxes nor deducts it under agreements signed after 2018. Treaty and state rules can change the result.
Individuals
The FTB says California residents must include RRSP earnings each year, even with no withdrawal; add them on Schedule CA if your federal return omits them. Treaty deferral does not change that. The FTB publishes no TFSA rule, so TFSA status is no exemption. Pre-move earnings are generally outside California's taxed portion; withdrawals and other states need separate checks.
Individuals
A move does not erase tax on earlier work. The former country may tax part of a later RSU vest, option, bonus or final pay; your new country of residence may tax it too. Check the award's service period, file the required returns, recover excess withholding from the country that took it, and claim any credit for eligible final tax.
Individuals
In a taxable account, the T5 is the practical starting point: a US return-of-capital label alone does not establish Canadian treatment; ask the issuer about any mismatch. Confirmed Canadian return of capital lowers cost base. Ask the US payer to correct excess withholding. US tax above the treaty rate, refunded, or inside an RRSP or TFSA earns no credit.
Individuals
Canada does not automatically shelter a US HSA or 529 plan. The owner or a trust may owe Canadian tax on annual earnings or a withdrawal; a resident contributor or beneficiary can also owe a deemed resident trust's tax. First confirm residence, including any treaty tie-breaker, and account ownership. Do not cash out solely because you are moving.
Individuals
Brokers generally withhold 10% of gross proceeds when a foreign investor sells publicly traded partnership units; cost does not reduce it, and an RRSP does not automatically switch it off. It is only a payment toward possible US tax, generally settled on Form 1040-NR when the units are held personally; for an RRSP or TFSA, who may claim it is unsettled.
Individuals
Canada generally waits to tax a traditional IRA or employer 401(k) until you receive a taxable payment. A Roth IRA needs a Canadian treaty election to protect its growth, and contributions after you become resident can end that protection for later growth. Some lump sums qualify for an RRSP deduction, but US withholding and early withdrawal tax can still apply.
Individuals
Generally no. A US citizen or green card holder living and self-employed in Canada pays CPP (QPP in Quebec), not US self-employment tax. The IRS asks for a Canadian agency statement, which may not be routinely issued for Canada-only work. If you paid both, file Form 1040-X within 3 years of filing or 2 years of payment, whichever is later.
Individuals · Self-employed
Moving to Canada does not by itself end your old state's income tax. California and New York tax worldwide income while you are a resident, then only state-source income. First fix the date your residency ended. If it ended mid-year and you must file, use Form 540NR (California) or IT-203 (New York) and pay that state. Canada may credit some.
Individuals
You can file both returns yourself if you can establish where you are tax resident, identify every required return, and reconcile income and foreign tax credits across countries. Get cross-border help when residence changes, treaty claims, elections, business income, or mismatched tax years make one return depend on the other. Paper filing alone does not require an accountant.
Individuals · Self-employed
Paying more tax in Canada does not automatically erase US tax on investments. The US limits foreign tax credits by income source, category and year. US dividends can leave IRS tax payable under treaty rules, net investment income tax is outside the credit, and TFSA income generally has no Canadian tax to credit. Match your balance to one cause first.
Individuals
If you live in Canada and work remotely from Canada for a US employer, Canada generally taxes your pay and the US generally does not tax those workdays if you are not a US citizen or tax resident. Workdays in the US can be taxed there too. Report all pay in Canada; a US return may be needed for US work or a refund.
Individuals
Sole proprietors, partnerships and corporations: if your worker works in the US, get an IRS EIN and work-state accounts; if in Canada, get a CRA payroll account and, when Quebec payroll applies, Revenu Québec registration. The employer remits withholding, pays required employer contributions and files wage statements. Check workdays, treaty relief and social security coverage before the first paycheck.
Self-employed · Partnerships · Corporations
For US-only work, a Canadian corporation generally owes no Regulation 105 withholding or T4A-NR, but may owe Form 1099-NEC. Request a W-9; a missing taxpayer number can trigger US backup withholding. Canadian work requires Regulation 105 withholding unless CRA approves a waiver, and a T4A-NR even if withholding is waived.
Corporations
A Canadian resident can receive salary, dividends, a documented loan, or a payment through a Canadian company, but each has different tax and filing rules. Salary for work in Canada is employment income. A US corporation's dividend is foreign investment income. A single-member US LLC may be disregarded in the US yet treated as a corporation in Canada, so withdrawals need separate Canadian analysis.
Self-employed · Corporations
Before the first US payday, the Canadian corporation should check Form 8233, state withholding and Canadian deductions. A Canadian treaty resident who is not a US citizen may avoid federal tax on US-work pay under the $10,000 or 183 days treaty test; a state can still tax it. Form 1120-F may be due before a permanent establishment makes attributable profit taxable.
Corporations
A payer generally withholds 15% from gross fees paid to a US business for services physically performed in Canada, unless the CRA authorizes a waiver or reduction before payment. Work performed in the US is outside this rule. The withholding is a credit toward possible Canadian income tax, not a final tax; a Canadian return may still be required.
Self-employed · Partnerships · Corporations
Yes. Stock in a US warehouse can create physical presence for sales tax and business taxes, even when a marketplace handles checkout and delivery. Marketplace collection may remove your duty to collect tax on those sales, but registration and returns depend on the state. Storage or delivery alone generally does not create a US permanent establishment under the Canada–US treaty.
Self-employed · Corporations
First classify software and tally sales by state. A Canadian corporation must register and collect where its sale is taxable and meets the collection test; it owes tax it should have collected. New York and Washington tax remote prewritten software; Texas taxes many SaaS charges as data processing. California generally does not tax SaaS without a transferred copy through 2026.
Corporations
First identify the importer: it needs a Canadian business number and import-export account before importing; the importer and owner can both owe applicable import tax. Test GST/HST registration on direct and marketplace sales and apply within 30 days if required. A corporation carrying on business in Canada files T2 despite treaty relief. A sole proprietor files their own T1 if required; each partner tests their own T1 or T2 duty.
Self-employed · Partnerships · Corporations
Keep separate books for the Canadian and US companies. Record each sale in the company that actually sells to the customer. When the other company collects payment, record cash and an amount owed to the seller, then clear both intercompany accounts on settlement. Match balances in the currency owed before comparing converted ledger amounts.
Corporations
Not sure which rules apply?