Your US investments and retirement accounts after a move abroad
What moving abroad does to an American's funds, brokerage account, 401(k), IRA and Roth. The PFIC trap with non-US funds, brokers and foreign addresses, how treaties treat pensions, and the forms that follow you.
Your US investment and retirement accounts can usually stay where they are when you move abroad. The US keeps taxing them the same way, because it taxes citizens wherever they live. Three things change. Buying funds based outside the US can trigger the PFIC rules. Your US broker may limit an account with a foreign address. And your new country may tax the same money, with a tax treaty deciding who goes first.
This guide explains the general rules so you know what to ask. It does not tell you what to buy, sell or keep.
New to US tax abroad? Start with Do I still file US taxes if I move abroad? It covers filing thresholds, the FBAR, Form 8938 and the foreign earned income exclusion.
The PFIC trap: funds based outside the US
A passive foreign investment company (PFIC) is a foreign company that meets either of two tests: 75% or more of its gross income is passive, or at least 50% of its assets produce passive income. Many mutual funds and ETFs set up outside the US meet these tests. That can include the funds a local bank or pension provider abroad is most likely to offer you.
IRS Publication 54 says it plainly: if you own a mutual fund or ETF that is not domiciled in the United States, you may have a Form 8621 obligation.
How PFICs are taxed
The IRS describes three ways a PFIC can be taxed:
| Method | What happens |
|---|---|
| Default (section 1291, “excess distribution”) | Large distributions and gains on sale are spread back over the years you held the fund. The part for the current year is ordinary income. The part for earlier years carries a separate tax plus an interest charge. |
| Qualified electing fund (QEF) election | Each year you include your share of the fund’s ordinary earnings as ordinary income and its net capital gain as long-term capital gain. The fund has to provide the information for this. |
| Mark-to-market election (section 1296) | For marketable funds, each year you include any rise in value as income, even if you did not sell. Deductions for falls are limited. |
Which method applies, and whether an election is still open to you, is a question for a US tax professional.
Form 8621
You generally file Form 8621 for each PFIC, each year, with your tax return. The instructions have a limited exception from Part I when your total PFIC stock is worth USD 25,000 or less (USD 50,000 on a joint return) and you had no excess distribution or gain. That exception covers Part I only. It does not say you can skip the form altogether. The current instructions are dated December 2025.
Foreign funds also count toward your FBAR and Form 8938 totals. The IRS lists foreign mutual funds as reportable on both.
If you hold US funds and move to the UK
The UK has a mirror-image rule. HMRC calls a fund based outside the UK an offshore fund. If the fund has reporting fund status, a UK resident pays Capital Gains Tax on a gain when selling. If it does not, the gain is normally an “offshore income gain”, taxed at Income Tax rates instead. A US mutual fund or ETF is based outside the UK, so these rules can apply to it.
HMRC publishes a list of funds with reporting status, updated monthly. HMRC’s helpsheet HS265 suggests asking the fund manager when you are unsure. Gains inside an ISA do not need declaring, but US persons should ask a professional how the US treats funds held in one.
If you move to Canada
Canadian residents with foreign property costing more than CAD 100,000 in total file Form T1135 with the CRA. Shares of non-resident companies count, including US shares and funds held at a broker. You do not file it for the year you first became resident. Property held in an RRSP or TFSA is excluded.
Your US broker and a foreign address
Some US brokers limit or close accounts once a customer reports a foreign address. Some let you hold or sell but not buy. Policies differ by firm and by the country you move to. There is no single rule.
Before you move:
- Ask your broker for its written policy for customers living in your new country.
- Ask what happens to each holding if the account is restricted or closed, and whether you can transfer it rather than sell it.
- Check the tax cost of selling in both countries before you act. A sale in the year you move can be taxed differently from a sale later.
Your address has to be real. US customer identification rules require a bank to collect a residential or business street address when you open an account. Giving an address where you do not live can breach your account terms. Ask your broker what address it accepts from customers abroad.
401(k), IRA and Roth accounts
What stays the same
US law keeps treating these accounts the same way after you move. Traditional accounts stay tax-deferred. Roth accounts keep their US tax-free status. The US early withdrawal rules still apply: the IRS charges a 10% additional tax on most IRA withdrawals before age 59½, unless an exception applies.
Withholding when you live abroad
When a US plan or IRA pays you, it withholds federal tax by default. The 2026 Form W-4R sets 10% for most one-off payments and 20% for eligible rollover distributions. For payments delivered outside the United States and its territories, you generally cannot choose less than 10%, including zero. Withholding is a prepayment. Your actual US tax is worked out on your return.
Paying in from abroad
To contribute to an IRA, you need taxable compensation. IRS Publication 590-A says amounts you exclude from income, such as foreign earned income and housing amounts, do not count. If you exclude all your foreign wages with Form 2555, you may have no compensation left to contribute from. The IRA limit is USD 7,000 for 2025 (USD 8,000 at 50 or older) and USD 7,500 for 2026 (USD 8,600 at 50 or older).
A 401(k) takes contributions through a US employer’s payroll. If you leave that employer, you usually choose between leaving the money in the plan and rolling it to an IRA. Ask the plan how it treats members living abroad.
How your new country sees them
Your new country decides how it taxes withdrawals, and sometimes growth, under its own law. A tax treaty may change that. Some countries recognise a Roth’s tax-free status, by treaty or their own law. Others may not, and tax withdrawals or growth under their own rules. Check the treaty and the new country’s rules before you count on a Roth staying tax-free.
Foreign pensions and social security
Once you work abroad, you may join a foreign pension plan. The US may tax contributions and growth in that plan, depending on the plan and any treaty.
- Reporting. Form 8938 asks you to report your interest in a foreign pension plan, not the assets inside it. The FBAR has its own rules for foreign accounts.
- Foreign trust forms. Rev. Proc. 2020-17 exempts eligible individuals from Forms 3520 and 3520-A for certain tax-favoured foreign trusts set up mainly for retirement, medical, disability or education benefits.
- Funds inside a pension. The Form 8621 instructions say a member of an arrangement treated as a pension fund under a US treaty does not have to complete Part I for PFICs held inside it.
- Social security. Publication 54 says benefits similar to social security from other countries may be taxable for US citizens. Under certain treaties, US social security benefits are exempt from US tax if your country of residence taxes them.
How tax treaties work for Americans
Treaties decide which country may tax which income first, and how the other country gives credit. Two points matter for Americans:
- The saving clause. Publication 54 says US treaties contain saving clauses, so US citizens generally cannot use a treaty to reduce their US tax. Most treaties make exceptions, often including pension articles. Read the saving clause in your treaty to see which exceptions apply.
- Form 8833. If you take a tax position based on a treaty, you generally disclose it on Form 8833 with your return.
Treaty texts and their technical explanations are on the IRS treaty pages. The US–UK treaty (2001) has articles on pensions and on pension schemes. The US–Canada treaty covers pensions in Article XVIII. The IRS streamlined FAQ says eligible individuals with a Canadian RRSP or RRIF are treated as having made the Article XVIII(7) election, which defers US tax on growth inside the plan.
Questions to ask a professional
- Are any of my holdings, including inside a foreign pension, PFICs? Which method applies to each?
- Should anything be sold, or an election made, before I become resident in my new country?
- How will my new country tax withdrawals from my 401(k), IRA and Roth? Does the treaty change that?
- Which forms do I file each year: Form 8621, Form 8938, the FBAR, Form 8833, and my new country’s own foreign asset return?
- Can I still contribute to an IRA if I use the foreign earned income exclusion?
Choose a tax professional who works with both the US and your new country.
What catches people out
- The local “safe” fund. A plain index fund from a bank abroad is usually a PFIC for a US person. It can mean Form 8621 each year and heavier US tax.
- Two regimes at once. A US fund can be a non-reporting offshore fund in the UK, while a UK fund can be a PFIC in the US. The same holding can be awkward in both countries.
- Withholding is not optional. Payments from US retirement accounts sent outside the US have at least 10% withheld.
- The exclusion can block IRA contributions. Income you exclude with Form 2555 does not count as compensation for an IRA.
- Forms with high penalties. Form 8938, the FBAR and the foreign trust forms carry their own penalties for missing them. If you are already behind, read our guide to catching up on US taxes abroad.
This is general information, not legal, tax, investment or immigration advice. Check the IRS, HMRC and CRA pages linked below, or speak to a qualified tax professional who knows both countries, before you act.