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The "Eqivalent to Spouse" Credit

The Tax-Free Savings Account (TFSA) has been in place since 2009. As of 2011, taxpayers can invest up to a total of $15,000 in a TFSA, and these funds can earn interest or dividends that are tax-free. The capital can also be withdrawn tax-free at any time.

U.S. citizens living in Canada should generally not open TFSAs. The income will be taxable each year on their U.S. return. As well, the TFSA must be reported with other foreign financial accounts on Form TD F 90-22.1 (available from www.irs.gov) to the Dept. of the Treasury, and possibly on Forms 3520 and 3520-A as a "foreign trust".

U.S. citizens who have opened TFSAs should consider withdrawing the funds (there is no tax cost). The withdrawal will reinstate the taxpayer's TFSA contribution room for Canadian tax purposes. If, at some point in the future, Canada and the U.S. negotiate an amendment to the Canada-U.S. tax treaty to accommodate TFSAs, or the IRS announces administrative relief, then the funds can be contributed back to



Last Updated ( Thursday, 08 September 2011 07:46 )