Tax Implications When Sending Money to Canada From USA

img source:

When it comes to transferring money or trading currencies, Canada has long been a favourable option. The CAD (Canadian Dollar) holds great appeal given the fact that it has shown that it is strong over the long term. The political and economic stability of Canada both add to the appeal, and ease, of transferring money to this country.

What if you are a US resident and are looking to transfer funds to a loved one in Canada? Are there any tax implications to be concerned about? How about making a gift of property or shares? Does this lead to any changes when it comes to tax? That’s what we’re going to take a look at here. You can find the information that you need by reading on and you can click here to find out more about sending money to the USA from Canada.

Canada and the rules around large transfers

One of the attractions of being resident in Canada is that there are no regulations or tax implications to be concerned about when receiving cash gifts. What this means is that if you are sending money to Canada from the USA, the recipient will not have to deal with any taxes related to gifts or capital gains tax. This keeps life easy with no difficult legal forms for your recipient to contend with.

That being said, as is often the case, there are a few exceptions to be aware of. These include:

img source:
  • Cash in the form of property
  • Company shares
  • Designated stocks
  • Other securities

In the above instances, gifts sent to a recipient in Canada could be subjected to capital gains tax. This is charged at a rate of 50%. Whether or not capital gains tax applies is down to the circumstances of your transfer.

Is it down to the recipient in Canada to declare these gifts?

As we have seen, with cash gifts there isn’t usually any need for a resident of Canada to declare them. There is no need to get involved with any of the complexities that tend to come with tax issues. However, if the gift falls into one of the exceptions that we have discussed above then the gift must be declared by the recipient.

The gift is declared by recording the transfer on their income taxes. If they neglect to do this then it is likely that they will be dealt with for tax evasion. A slip-up and mistake are dealt with by ensuring that the tax due is paid along with the relevant penalty. Omissions that are deemed to have been deliberate can lead to criminal action being taken.

img source:

The USA point of view

While a US citizen can transfer cash to a recipient in Canada with the Canadian not being liable for tax, or to even declare it, the story in the US is a little different. If you want to transfer $10,000 or more outside of the country then there is a legal obligation to inform the government. In practice, this is not usually down to the individual making the transfer as it will be dealt with by the bank or company that has been used to make the transfer.

That being said, it is not the case that individuals have no responsibility at all. In the following circumstances an individual is responsible for informing the IRS:

  • Sending $15,000 or more as a gift
  • Sending $10,000 or more as a business transaction
  • Holding a foreign bank account that has a balance of $10,000 at any time in the last 12 months

Am I limited with how much I can transfer?

If you are making transfers from the USA to Canada then there are no limits, according to law, on the amounts that you can send. You are legally free to send as much as you want from the US to Canada and, providing that you adhere to the tax rules that we have considered, this will not cause you any problems.

The only limitations that exist are imposed by the transfer providers themselves. If you are looking at sending large sums, and especially if this is going to be a regular occurrence, it is worth shopping around and finding providers that have either high limits or, ideally, no limits at all.

img source:

Is it easy for a Canadian recipient to get the money?

Transferring money from the US to Canada is easy. As such, there are no issues when it comes to the recipient actually getting their hands on the funds that have been sent. Exactly how this happens will depend upon the provider that you have used, but generally, the options are:

  • Bank to bank transfers
  • Deposits to a mobile wallet
  • Cash pickups

If your recipient intends to pick up cash then they must be prepared to prove their identity. Generally, this will mean them producing photographic ID. However, they shouldn’t need to do this each and every time if they have a Canadian bank account or an account with a money transfer company.

Points to consider before transferring funds

Generally, transferring funds from the US to Canada is a little different to any other transfers in terms of the considerations that come into play. These include:

  • The speed of a transfer
  • The cost of any associated fees
  • The security of any transactions
img source:

Sticking with a reputable company means that security is a given. You can rest assured that your transfer is safe. When it comes to costs and the speed of any transfer, you have the option to shop around. You can compare money transfer providers and ensure that you are using one that meets your needs and is giving you the best deal.

The key takeaways

When it comes to transferring funds from the USA to Canada, generally speaking, the recipient has no issues to address when it comes to tax. For the person sending funds, if these are in excess of $10,000 then there is a chance that the IRS will need to be informed. Falling foul of tax implications is easily avoided so make sure that you are sticking to the rules.

Written by Ana Weaver