I’m Mohammad Akif with Akif CPA. As a U.S. and Canadian cross-border tax specialist, one of the most common questions I receive—whether during consultations or via email—is:
“Can I roll over my RRSP into a U.S. IRA?”
It’s a great question and one that deserves some detailed clarification. Let’s break it down.
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Understanding the RRSP and IRA
Both the Registered Retirement Savings Plan (RRSP) in Canada and the Individual Retirement Account (IRA) in the U.S. are tax-advantaged retirement savings vehicles. On the surface, they seem quite similar—they both allow pre-tax contributions and grow tax-deferred until withdrawal. But here’s the key difference:
An RRSP is a Canadian retirement account funded with income earned in Canada, while an IRA is a U.S. account tied to U.S.-sourced income.
Because of this distinction, you cannot directly roll over your RRSP into a U.S. IRA.
What Happens If You Withdraw from Your RRSP as a U.S. Resident?
If you’re a U.S. resident and choose to withdraw funds from your RRSP, here’s what you should expect:
- Canada will withhold a 25% tax on the withdrawal, as it’s considered a distribution.
- Since you’re a non-resident of Canada at this point, this 25% is typically the only Canadian tax obligation.
- You will receive a NR4 slip from your Canadian financial institution, documenting this income.
- In the U.S., you are taxed on worldwide income. So, you must also report the RRSP withdrawal on your U.S. tax return.
- You may be eligible for a foreign tax credit on your U.S. return to account for the Canadian withholding.
Should You Contribute That Withdrawal to a U.S. IRA?
In most cases—no.
Why? Because once you withdraw from your RRSP, it becomes after-tax money. Placing it into a pre-tax IRA wouldn’t make sense, as you’ve already paid tax on those funds. And a Roth IRA contribution would also have limitations, especially if you’re exceeding income thresholds or contribution limits.
Are There Exceptions or Planning Opportunities?
Yes, but they are very specific and require proper planning.
In certain scenarios—such as years with lower U.S. income or strategic tax planning—you might be able to minimize the tax burden from RRSP withdrawals. Spreading the withdrawals out over several years, for example, could help avoid a hefty lump-sum tax hit.
But again, these cases are not the norm, and the majority of people will find that a direct rollover to an IRA simply isn’t possible or advantageous.
Bottom Line
You cannot directly roll over an RRSP into a U.S. IRA or 401(k) because of the different tax systems and how each country views income and retirement accounts.
However, there are tax strategies available if you’re planning to access your RRSP as a U.S. resident. The key is careful planning to avoid unnecessary taxes or penalties.
Need help navigating your cross-border retirement planning?
That’s exactly what we’re here for. Reach out to us at Akif CPA—we’d be happy to guide you through the process.
Disclaimer: This post is for informational purposes only and should not be considered tax advice. Consult with a qualified cross-border tax professional for your unique situation.
