Personal Finance

becoming a non-resident. RRSP HBP repayment issue.

  • Last Updated:
  • Aug 24th, 2021 6:40 pm
[OP]
Newbie
Mar 31, 2019
2 posts
Coquitlam

becoming a non-resident. RRSP HBP repayment issue.

Hi guys,

I'm going to be a non-resident as I'm moving to the US for a job. And I would like to get some advice on how to deal with my current HBP payment.

Currently, I have around 30K HBP to repay and learned I need to pay back ALL in 60 days after I become a non-resident. Otherwise, it will be added up to this year's income and taxable. My current marginal tax rate is around 40% and I don't have that much extra money to repay obviously. So my plan is to borrow some money now and pay all this year, then withdraw that 30K in January so I can pay only 25% non-resident RSP tax then receive 22.5K. Then pay back the loan. To do this I may save around $5K I guess. (40% tax vs 25% + loan int. = 13%-14% = $5K)

My question is;

- Is this going to be working? Or did I miss something?
- I will be a U.S. tax resident. How to deal with the US tax next year once I withdraw RSP. No double taxation because of a treaty?

Any advice would be appreciated. Thanks!
2 replies
Deal Expert
User avatar
Jan 27, 2004
50038 posts
14087 upvotes
ONTARIO
Just wanted to add... an RSP loan isn't a bad idea. They come @ really low interest rates. Usually prime or Prime+1%.
They are also pretty easy to qualify for. The bank would love to lend you some money, so you can invest with them.
con is, you have to invest that RSP loan money with the bank that gave you the loan.
Deal Fanatic
User avatar
Jan 6, 2002
6400 posts
6833 upvotes
Toronto
agentwing6256872 wrote: - I will be a U.S. tax resident. How to deal with the US tax next year once I withdraw RSP. No double taxation because of a treaty?

Any advice would be appreciated. Thanks!
There's some RRSP strategies that can let you liquidate and only be taxed at 25% rate. If you can coordinate that liquidation with a low taxable US income in the same year, there are significant tax savings possible.

You will need to find an accountant who specializes in tax efficiency for Canadians who are leaving Canada and severing all ties to Canadian finances.
Si Tacuisses, Philosophus Mansisses

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