US Expat Tax in Canada (2026)
Americans working in Canada still owe US tax on worldwide income. This guide covers the Foreign Earned Income Exclusion ($132,900 for 2026), the Foreign Tax Credit (Form 1116), housing exclusion, and Self-Employment tax — with a $110,000 worked example.
FEIE vs Foreign Tax Credit in Canada
Canadian combined federal + provincial tax is higher than the US on essentially any salary — the Foreign Tax Credit almost always wins. Dual citizens and green-card holders in Canada generally end up with zero US federal tax after FTC, but must still file 1040, FBAR, and often Form 8938. Watch out for TFSAs and RESPs — they are not US-tax-advantaged and can create PFIC problems.
Key facts: US & Canada
Tax treaty
Yes — US/Canada treaty in force since 1980 (Fifth Protocol 2007)
Totalization
Yes — since 1984; avoid double SS/CPP with Certificate of Coverage
Local top rate
33% federal + provincial (combined ~48–54%)
High-cost housing cities
Toronto, Vancouver, Calgary, Victoria all listed in IRS Notice
Worked example — $110,000 salary (2026)
Single filer, full qualifying year (330+ day physical-presence test), standard deduction, no self-employment income. Numbers are federal only — add local Canada tax separately.
Gross salary
$110,000
FEIE exclusion
$110,000
2026 limit $132,900
US federal tax with FEIE
$0
After stacking rule
FEIE tax saving
$15,370
vs no exclusion
Run your own numbers on the Foreign Earned Income Exclusion calculator — add housing, adjust qualifying days, toggle self-employment.
Canada income tax (for context)
Canada federal income tax is progressive: 15% to CAD 57,375, 20.5% to CAD 114,750, 26% to CAD 177,882, 29% to CAD 253,414, 33% above (2025). Provinces add their own brackets — combined top rate runs ~48% (AB) to ~54% (NL). The federal Basic Personal Amount is CAD 16,129 (2025).
Foreign Housing Exclusion — Toronto / Vancouver
The default housing exclusion cap is 14% of the FEIE limit ($18,606 for 2026), after subtracting the 16% base amount. Toronto and Vancouver are listed in the IRS annual high-cost city notice, which allows a higher per-city cap. Use the current year's notice (IRS Notice 2025-series) for the specific per-city dollar limit — these numbers change annually.
Frequently asked questions
Should I use FEIE or FTC as an American in Canada?
Foreign Tax Credit almost always. Canadian federal + provincial tax runs higher than US federal tax on nearly any salary, so the FTC zeros out US federal liability without the FEIE's stacking-rule complications. The FEIE can only help low-income or part-year expats. Most Americans who become long-term Canadian residents revoke the FEIE election (5-year lockout) and use pure FTC.
Are TFSAs and RESPs tax-free in the US?
No. TFSAs and RESPs are fully US-taxable. The US does not recognize TFSAs as tax-advantaged, so interest, dividends, and realized capital gains inside a TFSA are reported on your 1040 each year. RESP growth is US-taxable to the contributor annually under the grantor trust rules. Canadian mutual funds inside these accounts are usually PFICs (Form 8621). RRSPs are treated better — treaty-based deferral is automatic under the 2014 IRS simplification.
Do I pay US Social Security on Canadian self-employment income?
Usually no. The US-Canada Totalization Agreement (in force since 1984) means if you are covered by CPP/QPP as a self-employed Canadian resident, you are generally exempt from US Self-Employment tax on the same earnings. Request a Certificate of Coverage from the CRA (for Canadian coverage) to document the exemption with the IRS.
How does the treaty handle my RRSP?
The US-Canada treaty (Article XVIII) plus IRS Rev. Proc. 2014-55 gives automatic US deferral on RRSP growth — no annual reporting required, no Form 8891 since 2014. Contributions are not deductible for US purposes, but internal earnings defer until distribution. Report RRSPs on FBAR and Form 8938 if thresholds apply.
Do Toronto and Vancouver qualify for a higher foreign housing exclusion?
Yes. Toronto, Vancouver, Calgary, and Victoria all appear on the IRS annual high-cost city table with enhanced housing exclusion limits. Use the current year's IRS notice for each city's specific dollar limit — Vancouver in particular has one of the higher per-city caps among Canadian cities.
Sources
Related Calculators
Foreign Earned Income Exclusion
Form 2555 FEIE limit, housing exclusion, and qualifying tests.
Self-Employment Tax
Calculate SE tax on 1099 and freelance income.
Quarterly Estimated Tax
Calculate quarterly payments for self-employed income.
Federal Income Tax
Calculate your federal income tax by filing status.