ISAs, TFSAs, RRSPs and SIPPs for US Persons: Which Foreign Accounts the US Recognises

Published 3 November 2026 by Steffan Kharmaaiarvi, founder

An adviser to a US person abroad meets the same question in every review: is this account tax-free for the client in the US too? For ISAs, TFSAs, RRSPs and SIPPs held by US persons the answer differs by account. A treaty defers US tax on some foreign pension accounts; nothing in US law or the treaties recognises an ISA or a TFSA. This note sets out which foreign tax-advantaged accounts the US recognises, what that means for reporting and for funds held inside, and what Borderfolio shows. It is decision support, not tax advice.

The starting point: the saving clause

A US citizen is taxed on worldwide income wherever they live (IRS Publication 54). Both treaties keep that right with a saving clause: the US may tax its citizens "as if this Convention had not come into effect" (UK–US treaty, Art. 1(4), treaty text); the Canada–US treaty does not affect US taxation of its citizens (Art. XXIX(2), consolidated text). A local tax-free status therefore carries over only where a treaty provision is excepted from the saving clause.

RRSPs and RRIFs: deferral by treaty

• Article XVIII(7) lets a citizen or resident of one country who is a beneficiary of an arrangement operated exclusively to provide pension or employee benefits elect to defer tax on income accrued in the plan until it is distributed. Article XXIX(3)(a) lists paragraph 7 of Article XVIII among the exceptions to the saving clause, so it is available to US citizens (Canada–US treaty).
• Rev. Proc. 2014-55 treats an "eligible individual" as having made the election automatically. Broadly, that is a beneficiary who has filed the US returns required, has not reported the plan's undistributed income as gross income, and has reported distributions as if the election had been made. Distributions are taxable when paid (Rev. Proc. 2014-55, §§4.01–4.02, §6).

UK pensions: Article 18, with a caveat

The UK–US treaty defines a pension scheme as an arrangement generally exempt from tax in its country and operated principally to provide pension or retirement benefits (Art. 3(1)(o)). Article 18(1) lets income earned by the scheme be taxed as the member's income only when it is paid out, and Article 1(5)(a) keeps Article 18(1) available despite the saving clause (treaty text). Two points stay with the client's US adviser. Article 18(1) is written for a resident of one country in a scheme of the other, and under Article 4(2) a US citizen is a US resident for treaty purposes only with a substantial presence, permanent home or habitual abode in the US. And the treaty does not name SIPPs.

ISAs and TFSAs: not recognised

An ISA lets a UK resident "save tax-free", up to GBP 20,000 in 2026-27 (gov.uk); income and gains in a TFSA are "generally tax-free" in Canada (CRA). Neither treaty mentions either account. An ISA is not a pension arrangement within Art. 3(1)(o), and a TFSA is a savings account rather than an arrangement operated exclusively for pension benefits, so Article XVIII(7) does not reach it. That is a reading of the treaty texts, not an IRS ruling, but we found no provision that recognises either. For a US person, income and gains inside are generally taxable in the US as they arise, and there is no local tax on them to credit (IRC §901(b)(1)).

What it means for reporting

• Form 3520. Beneficiaries of a Canadian retirement plan within Article XVIII(7) do not report it under section 6048 on Form 3520 (Rev. Proc. 2014-55, §5.01). Rev. Proc. 2020-17 exempts eligible individuals from Form 3520 for tax-favoured foreign retirement trusts that meet its conditions, and for non-retirement savings trusts only where they provide medical, disability or educational benefits (Rev. Proc. 2020-17, §5). A general savings account such as an ISA or TFSA does not fit those categories; a TFSA can take the form of an arrangement in trust (CRA IC18-1, ¶6), so its legal form is a question for the US preparer.
• Form 8938. Neither revenue procedure affects section 6038D. Abroad the thresholds are more than USD 200,000 on the last day of the year or USD 300,000 at any time (unmarried), and USD 400,000 or USD 600,000 (married filing jointly); an interest in a foreign pension plan is reported in Part VI, and assets reported on Forms 3520 or 8621 still count towards the threshold (IRS Instructions for Form 8938). Accounts at foreign institutions, wrapped or not, are in scope.
• FBAR. Rev. Proc. 2014-55 says it does not affect the FBAR (§5.01). See FBAR and Form 8938 thresholds.
• Funds inside. No Form 8621 is required for a PFIC held through an arrangement treated as a foreign pension fund under a treaty, where the fund's income is taxed to the member only when paid out (Treas. Reg. §1.1298-1(c)(4)). No such exception exists for an ISA or a TFSA: see PFICs inside a TFSA or ISA.

A worked example

Illustrative figures, converted at an illustrative CAD 1 = USD 0.72. An unmarried US citizen in Toronto holds:

At year end the total of USD 388,800 is above the USD 200,000 threshold for an unmarried taxpayer abroad, so Form 8938 is likely, with the RRSP reported as a foreign pension interest. If the TFSA earned CAD 3,000 of distributions, that is CAD 0 of Canadian tax and about USD 2,160 of US income in the year, with no Canadian tax to credit. If the funds in it are Canadian ETFs, each is likely a PFIC as well. The RRSP's income is not taxed in the US until withdrawn, and as a treaty pension arrangement its funds would fall within the §1.1298-1(c)(4) exception.

What Borderfolio shows

Each account can carry a tax wrapper. For a client marked as a US person, the finding "Foreign tax wrappers for a US person" lists ISAs and TFSAs as not tax-free in the US (attention) and RRSPs, LIRAs, LIFs and SIPPs as pensions where a treaty defers US tax, each with the treaty or IRS source and notes saying where a point is an inference (LIRA and LIF are treated as RRSP and RRIF from their legal status; SIPPs are not named in the treaty). The PFIC screen and the FBAR and Form 8938 screen run alongside it.

Not modelled: no US tax on income inside a wrapper is computed; Forms 3520, 8938 and 8621 are not prepared, and whether an account is a foreign trust is not assessed; other wrappers (FHSA, RESP, European and Australian accounts) are not given a US status; and the treaty residence question for SIPPs is left to the client's US adviser.

Not tax advice. This article is general information for professional advisers, written from the sources linked in it as read on 3 November 2026. It does not compute anyone's tax; the client's US and local tax preparers apply the rules to the facts.

Frequently asked questions

Is a TFSA tax-free for a US citizen?

Not in the US. The Canada–US treaty's deferral in Article XVIII(7) covers arrangements operated exclusively to provide pension or employee benefits, and no provision recognises a TFSA, so income inside it is generally taxable in the US as it arises. That is a reading of the treaty, not an IRS ruling.

Does a US citizen in Canada have to elect to defer US tax on an RRSP?

Usually not any more. Rev. Proc. 2014-55 treats an eligible individual as having made the Article XVIII(7) election automatically, and removes the Form 3520 reporting for these plans. Form 8938 and the FBAR are not affected.

Is an ISA tax-free for a US citizen living in the UK?

No. The UK–US treaty does not mention ISAs and an ISA is not a pension scheme within its definition, so income and gains in it are generally taxable in the US. UK pension schemes are treated differently under Article 18.