Converting RRSP to USD

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  • Jul 24th, 2020 8:21 am
Feb 7, 2019
94 posts

Converting RRSP to USD

Hello! I have an RRSP and TFSA in CAD and I would like to convert them to USD to be able to buy US stocks (more choice and better returns in my view).
What are the disadvantages (if any) of holding the RRSP and TFSA in USD? Any tax downsides?
3 replies
May 4, 2010
260 posts
There's no downside from a tax perspective.

I'm assuming your account can only hold CAD right now. Ideally your brokerage should add a new account that is still RRSP or TFSA, but can hold USD, i.e. it doesn't automatically convert everything to CAD.

For example, you have a main account number 12A345, and your RRSP is 12A345R. Your broker should be able to create a new RRSP USD account with 12A345U. If they can't, find another brokerage.

There should be nothing preventing you from buying USD-denominated stocks in your existing account right now. I mean, if you really wanted you could buy SPY or VTI with CAD. It's just that in order to do so the broker would exchange CAD for USD at a rate that you have little control over. And when SPY pays a dividend, it would be immediately converted to CAD. When you sell, there's a conversion.

The advantage of the USD account is that it doesn't convert on both ends. Proceeds of sales or dividends stay in USD. If you're short of USD for a purchase, the broker could pull CAD and convert, but now it's preventable and probably cheaper if you do your own conversion ahead of time - see Having a CAD and USD version of an account is what allows this to work.

One other thing, there are some TSX companies that pay their dividends in USD. If you happen to hold these in a CAD account, they'll be converted. But now they can be transferred to the USD account where the dividends remain USD.

When it comes to withdrawing USD you have to check if your brokerage allows transferring USD out without conversion.
Sr. Member
May 2, 2019
707 posts
Jyelong wrote: Any tax downsides?
Yes, there is a certain tax disadvantage of holding US dividend-paying stocks in TFSA. You'd have a tax on dividends withheld at the source (by the corresponding US company) as they are supposed to do that for holders outside of US unless covered by a tax treaty. TFSA is not recognized as a tax-exempt account by the US-Canada tax treaty. You'd get the tax withheld, with no compensation/credit on Canadian side for it, even though TFSA is supposed to be tax-free here.

No such problem in RRSP, as it's recognized by the US-Canada tax treaty and US won't be taxing those dividends.
Deal Addict
User avatar
May 6, 2010
3136 posts
Adding on to what introspect said.

Check with your brokerage! TD keeps US and Cad in separate accounts. My wife still has the TD but I switched to BMO a few years back. I think BMO was the only one, at that time, that let me transact in both currencies. I can buy US stocks and pay for them in Cad or Cad stocks and pay US. It will pop up a warning message.

With BMO, US div are converted to Cad. No drip on US stocks.


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