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Holding savings accounts in a brokerage? US stocks are not tax sheltered in TFSA?

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Nov 2, 2003
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Holding savings accounts in a brokerage? US stocks are not tax sheltered in TFSA?

http://theinvestmentblog.net/2011/02/17 ... r-for-you/

This article says:

1. You can hold savings accounts in a self directed brokerage.
2. Foreign income is not tax sheltered in TFSA. i.e. dividends from US stocks.

Is this guy on crack? My understanding of TFSA is the exact opposite of the above two points. Anyone know?
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Sr. Member
Aug 16, 2010
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Thornhill
I haven't read the article yet, but wrt point 2, I suspect what the author is talking about is the 15% US witholding tax on dividends. The TFSA is not part of the tax treaty, so income from US investments inside a TFSA are still subject to the witholding tax. Income from US investments inside an RRSP are specifically exempt from the witholding tax.
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Aug 16, 2010
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Thornhill
I'd actually like to add another point.

TFSA is probably the worst kind of account to hold US dividend paying stocks. You will lose the 15% of dividend payouts due to the witholding tax AND you will not be able to claim a foreign tax credit against it, as you would be able to if you held it in a non-registered account.
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Nov 8, 2010
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And I'll add an additional point. :)

The withholding rate is only 15% if you have a W8BEN on file with the broker for the account. It's 30% if you don't have the W8BEN on file.
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****... my TFSA is 70% US...

but regardless... the capital gains and dividends i earn in a TFSA are not subject to Canadian Tax right??
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actng wrote: the capital gains and dividends i earn in a TFSA are not subject to Canadian Tax right??
Correct.
Sr. Member
Aug 16, 2010
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Thornhill
actng wrote: ...the capital gains and dividends i earn in a TFSA are not subject to Canadian Tax right??

Correct, the witholding tax (15% or 30%) was deducted from your dividends before being deposited into your TFSA.
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OK I just called Questrade... (first mistake there i guess as we all know)... and they say the W-8BEN is for US residents only. LOL

Now what. How do I get this witholding tax down to 15%...
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Nov 15, 2010
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Ottawa
actng wrote: OK I just called Questrade... (first mistake there i guess as we all know)... and they say the W-8BEN is for US residents only. LOL

Now what. How do I get this witholding tax down to 15%...

Do the stocks you have pay a lot of dividends? I hold non-dividend paying US stocks (actually ETFs) in my TFSA. I might be wrong, but I think you can get foreign tax credit for the tax you pay.
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actng wrote: OK I just called Questrade... (first mistake there i guess as we all know)... and they say the W-8BEN is for US residents only. LOL

Now what.
You finally realize that you should be with a better broker?
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seems right to me, just submit the w8ben to your broker.
"We don't have a soul... We are a soul. We have a body." ~C.S Lewis
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eiad77 wrote: I might be wrong, but I think you can get foreign tax credit for the tax you pay.
No, you can't (in a TFSA).

The foreign tax credit can only be used to reduce the amount of Canadian tax you paid on the dividend. You don't pay any Canadian tax on the dividend in a TFSA. So no foreign tax credit is given to you.
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FlyingOctopus wrote: No, you can't (in a TFSA).

The foreign tax credit can only be used to reduce the amount of Canadian tax you paid on the dividend. You don't pay any Canadian tax on the dividend in a TFSA. So no foreign tax credit is given to you.

But you can use it as a credit for other dividends in a non-registered account, correct? Or is the foreign tax credit tied to that specific dividend?
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eiad77 wrote: But you can use it as a credit for other dividends in a non-registered account, correct?
I'm about 99.9% positive you can't.

No foreign tax credit is given to you (and no T-slip is given to you), because you will pay no Canadian tax on the security held in the TFSA.
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FlyingOctopus wrote: I'm about 99.9% positive you can't.

No foreign tax credit is given to you (and T-slip is given to you), because you will pay no Canadian tax on the security held in the TFSA.

Oh ok, thanks for answering.
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FlyingOctopus wrote: You finally realize that you should be with a better broker?

i realized this long ago. ever since they shorted my mutual funds when I wanted to sell it all.

but i'm stuck with them for now. and they are telling me i'm not eligible to fill out a W-8BEN and there is no way to reduce witholding taxes...
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OK i just hashed it out with Danny M from live chat.

Questrade automatically reduces witholding tax based on your driver's license. When they see you are non-US resident, they automatically adjust your tax code to reduce with holding taxes wherever applicable.

I just checked and that is true... HP gave me 96 cents of dividend and I got 14 cents taken away.

Questrade actually did something right!!!

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