Canada · Investment tax
Investment tax for Americans in Canada: the TFSA, the RRSP, the ETFs and the 3.8%
One page for a US citizen in Canada who holds Canadian accounts: which US forms each wrapper raises, which funds are PFICs, what the Canadian tax you paid does and does not offset, and how Atamatax prepares it.
By Danilson Ramos · Founder, Atamatax
Published June 2026 · Updated September 2026
Part of the Canada desk — every US tax topic for Canada in one place.
Check it for your own income
Does the 3.8% reach your investment income?
Four banded answers, no figures typed, no email. The read says which side of the threshold you sit on and — if you paid tax abroad — what that credit can and cannot do.
Free, no account, nothing you answer leaves this page. Open the full NIIT Exposure Check
A banded screen for a US citizen or resident; Form 8960 settles the exact figure. Four answers give bands for net investment income and MAGI, and no read here nets a foreign tax credit against the 3.8% — the Code allows none.
A Canadian's default portfolio — a TFSA of ETFs, an RRSP, an RESP for the children, a non-registered account at Questrade or Wealthsimple, a house — is close to ideal in Canada and full of US questions. The questions are not the same for each account, which is the first thing to understand: the same Vanguard Canada ETF is a Form 8621 in the TFSA and excused in the RRSP; the same dollar of dividend is credited in the non-registered account and uncredited in the TFSA. This page is the map.
The Canadian accounts, one table
| Product | PFIC inside? | FBAR | Form 8938 | NIIT | Person decides? |
|---|---|---|---|---|---|
| TFSA | Likely | Likely | Likely | Counts | Review |
| RRSP / RRIF | Unlikely | Likely | Likely | Depends | Review |
| LIRA / LIF | Unlikely | Likely | Likely | Depends | Review |
| RESP | Likely | Likely | Likely | Counts | Review |
| FHSA | Likely | Likely | Likely | Counts | Review |
| RDSP | Likely | Likely | Likely | Counts | Review |
| Non-registered brokerage account | Possible | Likely | Likely | Counts | — |
| Canadian mutual fund or TSX-listed ETF | Likely | — | Likely | Counts | — |
| Employer RPP / DPSP | Unlikely | Possible | Possible | Depends | Review |
| CPP / QPP / OAS | — | Unlikely | Unlikely | No | Review |
| Canadian rental property | — | — | Unlikely | Counts | — |
| Canadian principal residence | — | — | — | Counts | — |
| GIC / high-interest savings | — | Likely | Likely | Counts | — |
"Review" means the account's US character is a judgment a qualified person makes — Atamatax detects it and routes it, presenting the question as open.
The four questions, in the order they are answered
1. Which wrapper, and does the treaty recognise it?
The RRSP and RRIF (and the locked-in LIRA/LIF) are recognised: Article XVIII(7) defers US tax on undistributed income and Rev. Proc. 2014-55 makes the election automatic for eligible individuals. Employer RPPs may qualify under the same article. Nothing else is recognised — the TFSA, RESP and FHSA are taxed by the United States as they earn, and each raises a Form 3520 question that Rev. Proc. 2020-17 answers for some (education, disability) and not others (a general savings account).
2. What is inside, and is it a PFIC?
A Canadian mutual fund trust is treated as a corporation for US purposes and meets the PFIC tests (75% or more of gross income is passive or 50% or more of assets produce, or are held to produce, passive income); a TSX-listed ETF — XIU, VFV, ZSP, XEQT — is the same thing listed. Inside an RRSP the Form 8621 is excused (Reg. §1.1298-1(c)(4)); inside a TFSA, RESP, FHSA or a taxable account it is not. Directly held shares in Canadian or US companies are not PFICs, and a US-listed ETF bought through a Canadian broker is a US fund. Canadian funds and the PFIC rules goes fund by fund.
3. Which reporting forms?
- FBAR — every Canadian account, registered or not, toward the $10,000 combined peak. See FBAR for Americans in Canada.
- Form 8938 — the same accounts against $200,000 year-end or $300,000 peak (single, abroad); $400,000 year-end joint.
- Form 8621 — one per PFIC per year, outside the RRSP.
- Form 3520 / 3520-A — an open question for a trust-form TFSA or FHSA; possible relief for an RESP or RDSP under Rev. Proc. 2020-17; routed for review.
- Form 8833 — where a treaty position is taken: the RRSP deferral (now automatic), CPP/OAS, an RPP.
4. What does the Canadian tax do?
Canadian tax on non-registered income, on rent, on a property gain — creditable against regular US income tax on Form 1116, within §904 and with Article XXIV's re-sourcing rules where Canada taxes first. Not creditable against the NIIT: Bruyea is the decision, and the credit-boundary page the explanation. And where Canada charges nothing — the TFSA, the home — there is nothing to credit at all.
How Atamatax prepares it
| Situation | Route |
|---|---|
| An RRSP and a non-registered account of direct shares, income over the threshold | Simple — Form 1116 and Form 8960 side by side, RRSP deferred |
| A TFSA or non-registered account holding Canadian funds or ETFs | PFIC Portfolio — the Form 8621s, then Form 8960 on the resulting income |
| Many funds, an RESP and FHSA, an RPP, a property sold | Complex, with the classification questions reviewed by a person |
| Years never filed, or Forms 8621 omitted | The catch-up route first — the eligibility checker decides which, never a default |
| A large disposition, treaty positions, a departure from Canada | A scoping call before any package |
Documents to gather
- T5 (investment income), T3 (trust and fund distributions) and T5008 (securities dispositions) slips for the year.
- Annual statements for every account — TFSA, RRSP, RESP, FHSA, non-registered — listing each holding with its fund code or ticker.
- The Canadian notice of assessment, showing the tax paid.
- The highest balance each account reached in the year, for the FBAR.
- For a property sold: the purchase and sale documents, and the mortgage history in Canadian dollars.
Start with the map
Pick the Canadian accounts you hold; the free check returns every issue with its band and one next step. Nothing typed leaves your browser unless you ask for the result by email.
Authorities cited
- IRC §1297 — IRC §1297 — Definition of a passive foreign investment company
- IRS Form 8621 — About Form 8621 — Information Return by a Shareholder of a PFIC or QEF
- 26 CFR §1.1298-1 — 26 CFR §1.1298-1 — Section 1298(f) annual reporting; §1.1298-1(c)(4) exception for PFIC stock held through a treaty-qualified foreign pension fund
- FinCEN Form 114 (FBAR) — Report of Foreign Bank and Financial Accounts (FBAR)
- IRS Form 8938 — About Form 8938 — Statement of Specified Foreign Financial Assets
- IRC §1411 — IRC §1411 — Net Investment Income Tax (3.8%)
- IRS Form 8960 — About Form 8960 — Net Investment Income Tax (Individuals, Estates, and Trusts)
- IRS Form 1116 — About Form 1116 — Foreign Tax Credit (Individual, Estate, or Trust)
- IRS Form 3520 — About Form 3520 — Annual Return To Report Transactions With Foreign Trusts
- Rev. Proc. 2014-55 — Rev. Proc. 2014-55 — automatic tax deferral for Canadian RRSPs and RRIFs; eliminates the Form 8891 election
- Rev. Proc. 2020-17 — Rev. Proc. 2020-17 — exemption from Forms 3520 and 3520-A for certain tax-favored foreign retirement and non-retirement savings trusts
- US–Canada Income Tax Treaty — Convention between the United States and Canada (signed 1980), as amended by its five Protocols
- Estate of Bruyea v. United States (Fed. Cir. 2026) — Estate of Paul Bruyea v. United States, No. 25-1563 (Fed. Cir. Aug. 31, 2026) (precedential) — the U.S.–Canada treaty's Article XXIV(1) and XXIV(4)(b) credits are subject to the U.S. Law Limitation; the Code and Convention unambiguously preclude offsetting the NIIT by a foreign tax credit; reversing 174 Fed. Cl. 238 (2024)
- CRA · TFSA — Canada Revenue Agency — Tax-Free Savings Account (TFSA)
- CRA · RRSPs and related plans — Canada Revenue Agency — RRSPs and related plans (RRIF, LIRA, LIF)
- CRA · RESP — Canada Revenue Agency — Registered Education Savings Plans (RESPs)
- CRA · FHSA — Canada Revenue Agency — First Home Savings Account (FHSA)
Primary sources (Cornell Legal Information Institute for the US Code and CFR; IRS.gov for forms, procedures, and treaty documents). This page is general information, not individualized tax or legal advice.
Atamatax provides tax preparation support and educational resources. This website does not constitute legal or tax advice.