Canadian Tax on U.S. Investment

canadiantax-on-usinvestments

There are lucrative investment opportunities for Canadians in America. Learn more about investing in the US and how it’s taxed in Canada. Canadians are taxed on their international income, so it’s important to understand cross-border investment implications.

Since Canadian residents are taxed on their worldwide income, you must report US dividends, interest, capital gains, and other forms of investment income on your T1 tax income return. Earnings will need to be converted to Canadian dollars, to do this: use the annual average rate or the rate on the day of the transaction – whatever benefits you.

Account types

Earned income in a registered account, such as registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs), is not taxable while it remains in the account. Non-registered accounts, such as a savings account, any interest earned inside the account is fully taxable in the year it is earned.

Two types of US investment incomes


  1. US dividends

    What is a dividend?
    A dividend is a payment a corporation makes to share profits with its stockholders.

    Tax treatment of dividends

    The US withholding tax rate for Canadian investors is 15% on US dividends. This rate is a lower 15% than what is charged to other foreign investors, per our Canada-US Tax Treaty. To ensure this lowered withholding rate you must submit Form W-8.

    If there are any withholding taxes, they will be deducted from any US dividends you earn before they are paid to you. Due to the Canada Revenue Agency’s (CRA) protection against double taxation, Canadians can claim a foreign tax credit for the full 15% of the US withholding tax applied to the dividend payments. 

    To avoid the withholding tax, keep your US dividend stocks in a retirement account like RRSP or locked-in retirement account (LIRA).

  2. Interest

    What is interest income?

    Interest income is earned money from investments that pay interest like savings accounts or certificates of deposits.

    Tax treatment of interest income

    All interest income must be declared on your annual tax return in Canadian dollars, according to the CRA. requires that. Generally, interest income earned in the US has no withholding tax for a Canadian resident.

    There are many forms of investments for Canadians in America each with its own implications. Contact us to learn about tax planning for your US investments.

For more information on tax implications on your U.S. investments, reach out to us directly, and we can help you out.

57 thoughts on “Canadian Tax on U.S. Investment

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