Yes, this can get complicated since it involves both inheritance law and cross-border retirement rules. You’re correct, inheritances usually aren’t taxed as income in the U.S. But an RRSP, much like a U.S. IRA, holds income that hasn’t been taxed yet. As a result, this is fully taxable to your wife. Here is how to report.
Do not use the "Canadian Registered Pension" section; as you noted, she isn't the owner of a pension. Instead, report it as Miscellaneous Income to keep the entry clean and avoid "1099-R" e-file rejections:
- Go to Federal > Wages & Income.
- Scroll to the bottom and select Miscellaneous Income, 1099-A, 1099-C.
- Select Other reportable income.
- Description: Enter "Distribution from an inherited RRSP ".
- Then list the amount from the check.
Even though you entered the income as "Miscellaneous," you can still link the 25% withholding (Box 17) to it and receive a foreign tax credit.
- Go to Federal > Deductions & Credits.
- Select Foreign Tax Credit (under Estimates and Other Taxes Paid).
- When the interview asks if you have "other types" of foreign income (after it checks for 1099-INT/DIV), say YES
- Choose Passive Income as the category.
- Country: Canada.
- When you get to a section that says Gross Income, type "Inherited RRSP Income." for a description
- Income Amount: Enter the same USD amount you reported in the Miscellaneous section.
- Foreign Tax Paid: Enter the amount of foreign tax from the distribution. This will be in a section where you enter the foreign taxes paid
- Date Paid: Use the date on the check or 12/31/2025.
- Finish out the interview by selecting continue until the end.
[ Edited 03/5/2026 I 7:51am PST]
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