State Tax on RRSPs and TFSAs: California and Other States

Does the federal treaty decide whether my state taxes RRSP and TFSA growth?

Federal deferral for a Registered Retirement Savings Plan (RRSP) does not settle your state return. California rejects that deferral for state income tax in writing; another state's starting point and adjustments must be checked separately.

Article II of the Canada–US treaty lists federal income taxes as the US taxes it covers, so the deferral election in Article XVIII(7) does not set California's result. The FTB agrees: a treaty limited to federal income taxes does not apply to California, and its RRSP entry says the treaty deferral does not apply there. See the treaty, Articles II and XVIII, FTB Publication 1031 (2025 edition), Tax Treaty and FTB Publication 1001, RRSP entry.

How the IRS treats RRSPs and Tax-Free Savings Accounts (TFSAs) belongs in Canadian registered accounts on a US return.

Does California tax RRSP earnings every year without withdrawals?

Yes, according to the FTB. Publication 1001 says California residents must include RRSP earnings in taxable income in the year earned, even when the earnings stay inside the RRSP. It also says an RRSP does not qualify as an IRA or receive IRA treatment. FTB Publication 1001, RRSP entry.

The important distinction is earnings versus a change in account value. The FTB directs RRSP earnings to the interest, dividend and capital-gain lines: what the RRSP earned in the year, including amounts reinvested inside it. A balance change alone does not show that amount, because contributions and withdrawals also move the balance.

Publication 1001 does not say whether a rise in the value of holdings the RRSP has not sold counts as earnings, and California's general capital-gain guidance speaks of gains from a sale or exchange. That point is unsettled; have it reviewed before relying on either reading.

Does a TN, L-1 or L-2 visa make me a California resident?

The visa does not decide it. California looks at why you are in the state and for how long; a long or indefinite work assignment is not temporary, so you become a resident when you enter the state, and a resident is taxed on income from all sources. California also presumes you are a resident for any year in which you spend more than nine months in the state, and satisfactory evidence of a temporary or transitory stay can overcome that. A nonresident is taxed only on California-source income, such as pay for work done in the state. A treaty tie-breaker that makes you a Canadian resident for federal purposes (Article IV) does not by itself make you a California nonresident: the treaty covers only federal income taxes (Article II) and California decides residency on the facts. FTB Publication 1031, Coming into California and Residency and Sourcing Technical Manual, section 2400.

How do I report RRSP earnings on a California return?

If RRSP earnings were left out of your federal income, the FTB directs them to column C (additions) of Schedule CA, separated by income type: Schedule CA (540) for a resident return, Schedule CA (540NR) for a nonresident or part-year return. If your federal return already includes the earnings, they are already in column A, so adding them again would count them twice. Schedule CA (540NR) instructions.

These are the entries in the latest published FTB instructions, the 2025 edition; confirm the line numbers in the version for the year you file. FTB Publication 1001, RRSP entry.

For Schedule CA (540), these entries are in Part I; for Schedule CA (540NR), Part II. Where California and federal capital-gain amounts differ, the Schedule CA instructions direct taxpayers to Schedule D (540). Provider statements are usually in Canadian dollars, so each amount needs converting for the return.

If you were a federal nonresident alien for part or all of the year, Form 1040-NR reports only US-source income, while California requires income from all sources. The FTB's row for foreign income of nonresident aliens uses a different line (8z, column C) from the RRSP row, so use the FTB instructions for the return year to place RRSP earnings. Publication 1001, Foreign income of nonresident aliens.

For a part-year move, Schedule CA (540NR) columns A through D compute income as if you were a resident for the whole year; column E identifies income during residency and California-source income during nonresidency. Full-year income can affect the effective tax rate even when it is outside the California portion. Form 540NR booklet, How Nonresidents and Part-Year Residents Are Taxed.

A couple uses the same California filing status as on the federal return. If you file jointly and either spouse was a nonresident or part-year resident, file Form 540NR. FTB Publication 1031, Which Form to File and Filing Status.

What happens when I later withdraw from the RRSP?

The concern is double counting: the federal return may tax earnings that California already taxed in earlier years. Keep records of contributions, distributions and earnings already included on California returns.

Publication 1001 gives an annual earnings rule but no RRSP-specific withdrawal worksheet explaining how previously taxed earnings are recovered. Whether the whole withdrawal is taxable again or entirely exempt is not stated, so have the California treatment reviewed before claiming an adjustment. FTB Publication 1001, RRSP entry.

California does not allow a foreign tax credit and does not follow the federal deduction for foreign income tax, so Canadian tax or withholding on a withdrawal needs its own review. FTB Publication 1031, Foreign Tax Credit and Publication 1001, Taxes.

Does California tax TFSA growth?

California publishes no TFSA rule: Publications 1001 and 1031 do not mention a TFSA. California taxes residents on income from all sources, and the TFSA exemption is Canadian law, so TFSA status alone is not a California exemption the FTB has published. FTB Publication 1031, Income Taxable by California.

California starts from your federal return, so TFSA income already reported federally is part of the California computation. Income left off the federal return must still be added unless California law excludes it, and the FTB publications show no TFSA exclusion. FTB Publication 1031, Avoid Common Mistakes. The US classification of the account decides what the federal return contains; see Canadian registered accounts on a US return.

What about RRSP or TFSA growth from before I moved to California?

Interest, dividends and gains your RRSP or TFSA earned before you became a California resident are generally outside the California portion of a part-year return, though they still count in the full-year computation that sets your rate. How earlier growth is treated when it is later withdrawn is not published. FTB Publication 1031 and Form 540NR booklet.

The FTB's closest published rule is for IRAs, not RRSPs. It treats someone who becomes a California resident as a resident for all prior years for all items of deferred income, and it no longer gives a stepped-up basis for earnings made while a nonresident. FTB Publication 1005, IRA basis of former nonresidents. The FTB does not say whether this reaches an RRSP, and Publication 1001's RRSP entry sets no move-date basis formula.

Keep original purchase records and statements showing values around the move. A move-date market value is useful evidence, but the FTB's RRSP guidance does not say to replace historical cost with that value, so whether any new basis applies is an open question. Whether to cash out an RRSP or close a TFSA before leaving Canada belongs in Moving from Canada to the US.

Which other states follow the federal result?

No source on this page confirms that any state follows the federal RRSP deferral. California rejects it in writing; New York starts from the federal figure and says nothing about RRSPs; Florida has no personal income tax; Washington taxes certain capital gains separately. The table is not a list of states that exempt RRSP earnings.

The New York IT-201 and IT-225 modification instructions mention no RRSP or other Canadian retirement plan. That is silence, not a ruling, so whether New York reaches RRSP earnings left out of the federal figure is unconfirmed.

For another state, look for three things:

• whether its return starts from your federal return;
• whether its list of additions mentions deferred or foreign retirement income or tax-treaty income;
• whether its resident and part-year instructions say anything about Canadian plans.

If my state has no income tax, is there anything to report?

A state with no personal income tax has no state income-tax return to file for this, but three things can remain: federal foreign-account reporting, a return for the state you left in the year you moved, and any separate tax on investment gains. Florida's FAQ says it does not impose a personal income tax, so there are no filing requirements. Florida Department of Revenue FAQ.

Washington's capital gains tax exempts assets in listed retirement plans "or a similar retirement savings vehicle, whether foreign or domestic, that penalizes withdrawals until the legal or beneficial owner reaches a certain age." RCW 82.87.050. The Department of Revenue's page does not say whether an RRSP or TFSA meets that wording, and a TFSA allows withdrawals at any time, so Canadian registration alone does not settle it.

If I leave California later, can it tax RRSP or TFSA withdrawals?

Leaving California changes the analysis only when your California residency ends; a temporary absence may leave you a resident taxable on all income. After residency ends, new interest and dividends are generally sourced to where you live, and stock and bond gains to where you live at the sale, so they are not California-source income unless tied to a California trade or business. What California does with a later withdrawal of earnings it taxed while you were a resident is not published. FTB Publication 1031, Leaving California and Income Taxable by California.

California publishes nonresident exemptions for specified pension distributions. Whether an RRSP qualifies is open: Publication 1001 says an RRSP is not an IRA, and the federal limit on state tax of a nonresident's retirement income, 4 U.S.C. 114, lists plan types such as qualified employer plans, IRAs and section 457 plans without naming an RRSP. Publication 1031, Pensions and Keoghs and Publication 1001, RRSP entry.

I never reported RRSP earnings to California. How do I fix it?

Reconstruct the RRSP earnings for each affected year. If you filed a California return for the year, review whether it needs amendment; if you filed none, the year needs an original return. Reporting everything in the current year does not follow the FTB rule that earnings belong in the year earned. FTB Publication 1001.

Gather:

• Annual and transaction statements for every RRSP and TFSA, including reinvested income and sales.
• Purchase costs, contribution history, withdrawals and move-date statements.
• Dates and evidence of California residency.
• Filed federal and state returns, California adjustment schedules and tax notices.

The FTB's amendment procedure uses a corrected resident or part-year return with supporting documents and, for tax years 2017 and later, Schedule X explaining the changes; earlier years use Form 540X. Use the forms and procedure for the year being corrected. FTB: Amend an income tax return.

Which years are still open depends on your filing history. The FTB says the time limit to examine a return and mail a Notice of Proposed Assessment is usually 4 years from the due date or the date filed, and that an extended period may apply if the omission of income is greater than 25%. FTB: Keeping your tax records. Its audit manual gives that extended period as 6 years and says the FTB may assess at any time when no return was filed (R&TC section 19087). Manual of Audit Procedures, chapter 4.

Unpaid tax also carries interest, currently 7% with earlier periods in the FTB's table, and penalties: a late-filing penalty of 5% of the tax unpaid for each month or part of a month, up to 25%; a late-payment penalty of 5% plus 0.5% a month, for up to 40 months; and an estimated-tax penalty. The FTB may waive penalties for reasonable cause (Form FTB 2917) or cancel timeliness penalties under its one-time abatement (Form FTB 2918). FTB: Help with penalties and fees. Include these in the review of each affected year. Federal missed-account filings follow separate procedures in Missed FBAR or TFSA forms after filing US returns.

Example

Illustrative only. All figures are in US dollars after conversion; no tax rate or tax bill is calculated.

A Canadian employee is a California resident for the whole year and keeps an RRSP in Canada. The RRSP earns US$2,000 of interest and US$1,000 of dividends. The employee makes no withdrawals and qualifies for federal RRSP deferral. Shares held inside the RRSP also rise in market value by US$10,000 and are not sold.

Under the FTB's RRSP entry, the US$2,000 of interest and US$1,000 of dividends would be reported as annual earnings in column C (Section A, line 2 and line 3 in the 2025 edition). Publication 1001 does not say whether the unsold US$10,000 increase counts as earnings, so the example leaves it out; a later sale would need its own gain calculation.

If the employee instead moved to California halfway through the year, the dates of the earnings would matter. The return would separate the California portion from the full-year computation, and a day-count split of the US$3,000 cannot be assumed.

Different for you?

• A large RRSP, pre-move gains, a planned withdrawal or missed California years: the FTB's annual inclusion rule creates calculations separate from federal deferral. Bring statements, cost records, move dates and prior returns for cross-border tax review.
• Moving to the US on a TN visa: federal residence and filing rules need their own analysis in Canadians on a TN visa.
• Unsure whether your old state's residency ended: see US state tax after moving to Canada.
• Your TFSA's federal classification is unresolved: see Canadian registered accounts on a US return.
• A RRIF, LIRA, group RRSP or FHSA: the FTB's RRSP entry names only the RRSP, so whether it reaches these accounts is not stated.
• Canadian funds inside the accounts: any Form 8621 question belongs in Funds bought outside the US.
• Missing FBAR, Form 8938 or foreign-trust forms: see Missed FBAR or TFSA forms after filing US returns.