Investing in the U.S.: How to Set Yourself Up for Financial Success

For Canadians transitioning to life in the U.S., feeling truly settled can take time. One way to build a sense of security is to become financially invested in your new home. 

Now that you’re past wondering how to move to the U.S. from Canada, it’s time to plan your future south of the border. Taking steps to establish your financial foundation — including investing in the U.S. — may help you thrive in your new country. Here are some tips that can help you make smart decisions and set yourself up for financial success.

Consider financing your U.S. home

Many Canadians still believe the only way to buy a U.S. property is to pay for it fully in cash. But the reality is that Canadians can finance a U.S. property — and in fact, it might be a cost-effective way for you to buy a U.S. home. Consider this: By converting just your 20% down payment plus closing costs, you may reduce the upfront impact of foreign exchange costs. And, since there are no pre-payment restrictions on most U.S. mortgages, you’re not on the hook for any penalties should you sell your home and move back to Canada — or anywhere else in the United States. 

Concerned about meeting the requirements for a mortgage as a Canadian? Don’t be. RBC Bank uses your Canadian credit history to qualify you for a U.S. mortgage.¹ Your cross-border mortgage advisor can also walk you through the differences between Canadian and U.S. mortgages and guide you throughout the process — from getting a pre-approval (to help you determine your budget) to arranging for appraisals and title searches to closing on your new U.S. property.

Be sure to give yourself plenty of time to go through the home-buying process. There are a few differences between securing a mortgage in the U.S. and Canada. For example, applying for and securing a mortgage in Canada may take just a few days, but this process often takes 45-60 days in the U.S.

Investing in the U.S. goes beyond saving your U.S. dollars

Once you move to the U.S., it cam help your long-term goals to keep up an investment plan that is properly designed, balanced, diversified and built with you in mind. Your financial objectives might shift once you move to the U.S., so you’ll want your investment plan to evolve along with you. If you’re leaving investments in Canada (as many Canadians do), these investments ideally need to be integrated into your overall plan.

Working with a cross-border professional can help ensure that your investments align with your goals, that you’re taking advantage of U.S. investment opportunities, and that your Canadian and U.S. investments are working in sync.

You’ll have to file your taxes somewhere

As a Canadian citizen living in the U.S., you may wonder where you’ll need to pay taxes — Canada, the U.S., or both? Will you have a tax liability in each country?

These are common questions for Canadians living across the border. What’s important to remember is that the Canadian tax system is based on your residency status. This means that regardless of your Canadian citizenship, you can cease Canadian residency for tax purposes if you sever most, if not all, of your ties to Canada. This could involve selling or renting out your primary residence and having your spouse and children leave Canada with you or soon after.

As a non-resident of Canada, you will pay tax on Canadian source income only. That is, the income you earn within Canada. Here are some other tax considerations to keep in mind:

You may be treated as a resident of the U.S. for tax purposes

If you meet the Lawful Permanent Resident Test (which generally means you have a green card) or you pass the Substantial Presence Test. This is a calculation which tells you, based on the amount of time you have spent in the U.S. over the last three years, whether you are, in fact, considered a U.S. resident for tax purposes.

You may need to file a “part-year” tax return in Canada

If you leave Canada partway through the year and are considered to cease Canadian residency, you will likely have to file a resident Canadian tax return and report your worldwide income for the portion of the year that you were a resident of Canada. This is usually called your part-year tax return. 

When you stop being a Canadian resident, it’s as if you have sold most, if not all, of your assets — and any gains will be included in your worldwide income. If you are not considered to cease Canadian residency, you will continue to file income tax returns in Canada pretty much as you had before your move.

You’ll need to file a U.S. tax return if you’re a U.S. resident

If you’re considered a resident of the U.S. you will be taxed on worldwide income in the same way other U.S. citizens are and will be required to file a tax return by April 15^th of each year (or the next business day) unless you file for an extension. The Canada – U.S. Tax Treaty helps to reduce double taxation.

Taxes can be complicated, and managing them in two countries may be even more difficult. But you don’t have to tackle this alone. A cross-border tax expert² can help ensure your assets, estate plan and taxes are structured in a way that benefits you and your family. They can also help ensure that when investing in the U.S., you can make the most of the investment opportunities that exist for you while you’re living south of the border. 

¹ Mortgages are subject to approval, including verification of acceptable income, credit worthiness and property valuations. Minimum and maximum property values and maximum loan-to-value ratios apply. Homeowner’s insurance is required for all loans and lines of credit and flood insurance is required if the property is located in a Special Flood Hazard area. Escrows may be required on mortgages. There are closing costs associated with mortgage products.

² Consult your financial, tax, legal, and other professional advisors prior to applying for a U.S. mortgage.

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