Millions of Canadians own US stocks. Here are all the tax considerations you need to manage — from dividends to currency to T1135.
When you sell US stocks at a profit, the gain is a capital gain in Canada — taxed at the 50% inclusion rate. However, because US stocks are priced in USD, you must convert both your purchase price and sale price to CAD using the exchange rate on each transaction date. Your gain or loss is calculated entirely in CAD.
Formula: (Sale proceeds in USD × exchange rate on sale date) − (Purchase cost in USD × exchange rate on purchase date) = Capital gain or loss in CAD
If the CAD weakened against the USD between purchase and sale, your CAD-denominated gain is larger than your USD-denominated gain. If the CAD strengthened, your CAD gain is smaller. Exchange rate changes are automatically captured when you convert to CAD at each transaction date — you do not file separate currency gain/loss calculations.
The United States withholds 15% tax on dividends paid to Canadian residents under the Canada-US tax treaty (reduced from the statutory 30% non-resident rate). This withholding applies to cash dividends paid by US corporations like Apple, Microsoft, JPMorgan, and Johnson & Johnson.
| Account Type | US Dividend Withholding | Can You Recover It? |
|---|---|---|
| Non-registered (taxable) | 15% | Yes — foreign tax credit on T1 |
| RRSP / RRIF | 0% (treaty exemption) | Not applicable |
| TFSA | 15% | No — permanently lost |
| RESP | 15% | No — permanently lost |
If you hold US dividend stocks in a non-registered (taxable) account and pay 15% US withholding tax, you can claim a foreign tax credit on your Canadian T1 return (Form T2209). This prevents double taxation — you don't pay the 15% US withholding AND full Canadian income tax on the same dividend. The credit reduces your Canadian tax owing by the amount of foreign tax paid, subject to limits.
| Investment | Best Account | Reason |
|---|---|---|
| US dividend stocks (high yield) | RRSP | Zero withholding, tax-deferred growth |
| US growth stocks (no/low dividend) | TFSA | No withholding issue; gains tax-free |
| US dividend ETFs (VTI, VOO) | RRSP | Treaty exemption applies to ETF dividends |
| Canadian stocks | TFSA | No withholding; eligible dividends get credit |
If the total cost of your US stocks (held outside registered accounts) plus other foreign property exceeded $100,000 CAD at any time during the year, you must file a T1135. US stocks held in a TFSA, RRSP, or other registered account are excluded from this calculation.
Most Canadian investors holding US stocks through a Canadian brokerage can use the Category G simplified method on T1135, reporting the total rather than listing each stock individually.
When you convert crypto to cash, make sure it lands somewhere with zero fees. KOHO's no-fee account earns cash back and keeps your money accessible. Use code 45ET55JSYA for a bonus.
Get KOHO Free — Use Code 45ET55JSYAUS dividends (net of withholding) are reported as foreign income on line 12100 of your T1. US capital gains are reported on Schedule 3, in CAD. You claim the foreign tax credit (for withheld taxes) on T2209 and enter the credit on your T1.
Canadians who own US situs property (US stocks, US real estate) with total US assets exceeding US$60,000 at death may be subject to US estate tax. The Canada-US treaty provides relief through a proportional credit, but estates above certain thresholds (US$11.2M+ in 2025 adjusted for treaties) may still owe US estate tax. High-net-worth investors should consult a cross-border tax specialist.
US stocks are excellent long-term investments and widely held by Canadians. The key tax considerations are: capital gains are calculated in CAD; US withholding tax on dividends is 15% and can be recovered in non-registered accounts but not TFSAs; RRSP is the best account for high-dividend US stocks; and T1135 applies if your foreign holdings exceed $100,000 CAD in cost. Proper account placement — putting US dividend stocks in the RRSP — can eliminate the withholding drag entirely.