The instinct to “go American” is smart, but it may be expensive
When London accepted a brand new job opportunity in Seattle, he assumed the very first thing he would must do was convert his Canadian investment portfolio into U.S. dollars. Like many Canadians moving south, the logic seemed easy: If he desired to live, work and spend money within the United States, shouldn’t his investments even be in U.S. dollars?
At the time of his move, London had roughly $500,000 deposited in an unregistered account at a Canadian financial institution. The problem? Currency conversions usually are not investment decisions – they’re foreign exchange decisions.
In June 2026, the Canadian dollar stays relatively weak in comparison with the US dollar. At an exchange rate of about 0.7166, the $500,000 Canadian portfolio in London can be about $358,300.
Now imagine the Canadian dollar rising to 0.85 a number of months later. The same $500,000 can be value roughly $425,000.
While nobody can predict currency movements, the purpose is easy: exchanging a big portfolio immediately after crossing the border can permanently end in an unfavorable exchange rate. Foreign exchange markets move in cycles. Making a vital foreign exchange decision simply because you could have moved to a different country is never sound financial planning.
In many cases, Canadians can proceed to carry Canadian dollar investments after moving to the United States. If you propose to keep up your ties with Canada, own Canadian property, support relations in Canada, or potentially return someday, it might make sense to keep up some exposure to the Canadian dollar.
Your tax residence changes the principles
What needs to alter is the structure of your accounts – not necessarily the investments they contain.
If London moves to Seattle, his unregistered account at his Canadian institution cannot simply remain untouched. His change of residence has each regulatory and tax implications. Canada taxes based on residency; United States taxes are based on citizenship and residency. Once London becomes a U.S. tax resident, he can be subject to IRS reporting requirements for his worldwide income and assets, including investments held outside the United States.
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For many Canadians, this implies transferring unregistered assets to a U.S.-licensed advisor or institution able to serving U.S. residents while complying with Canadian and American regulations.
This is a vital distinction. The account may should be moved, however the investments themselves don’t necessarily should be converted into U.S. dollars.
Compare one of the best TFSA rates in Canada
Registered accounts require separate consideration. RRSPs generally proceed to receive favorable tax treatment under the Canada-U.S. tax treaty; However, not all US states adhere to the treaty. While most states respect the tax-advantaged status of an RRSP, some states may tax the account’s income and growth annually. For this reason, understanding federal and state tax regulations is a vital a part of any cross-border move.
The PFIC Trap: A Costly Surprise for Many New US Citizens
One of the largest surprises for Canadians moving south is the tax treatment of Canadian mutual funds and ETFs within the United States. The IRS generally classifies most Canadian mutual funds and ETFs as Passive Foreign Investment Companies (PFICs).
The PFIC rules are notoriously complex. They often require additional annual reporting and can lead to unfavorable tax treatment for U.S. taxpayers. Many Canadians don’t discover this problem until years after they move – often when a U.S. accountant checks their inventory for the primary time.
For London, this becomes an important planning consideration. If he continues to carry investments denominated in Canadian dollars after becoming a U.S. resident, he cannot simply keep the identical portfolio that he owned while living in Canada. Investments that worked perfectly as a Canadian resident can turn into problematic from a tax perspective within the US.
You can still own Canadian investments
Fortunately, avoiding PFICs doesn’t mean abandoning Canadian investments entirely.
Cross-border portfolios can often be constructed from individual Canadian stocks, individual bonds and other investments that usually are not subject to the PFIC rules. This allows investors like London to keep up their exposure to the Canadian market while avoiding unnecessary reporting complexity and potentially opposed tax consequences.
