Some things to know about buying U.S. stocks

There are opportunities to be had, as long as you'r careful

When it comes to buying U.S. stocks, here are the top 10 things your should know:

1. In a non-registered investment account, the IRS withholds a minimum of 15 per cent of dividends paid by U.S. companies to Canadian residents.

2. U.S. dividends do not qualify for the dividend tax credit. They are classified as foreign income and taxed in the same manner as interest income.

3. Dividends paid by U.S. stocks in a registered retirement account (RRSP or RRIF) are not subject to withholding since the IRS recognizes the tax-exempt nature of these plans. However, Canadian mutual funds and ETFs that invest in US stocks are subject to withholding.

4. Whenever a U.S. stock is traded in a Canadian dollar account there is a currency conversion typically involving an embedded fee. For example: when you purchase a U.S. stock there is a conversion to US dollars. Should you decide at a future date to sell the stock and buy a different U.S. stock, there would two more conversions: from U.S. to Canadian on the sale, and from Canadian back to U.S. on the subsequent purchase.

5. The same thing applies to Exchange-Traded funds that trade on U.S. exchanges, but not to ETFs that trade on Canadian exchanges.

6. Every time a dividend is paid there is a conversion to Canadian dollars. Should you decide to use the proceeds of dividends to purchase more U.S. stocks there is yet another conversion back to U.S. dollars.

7. Embedded fees apply every time there is a conversion.

8. The IRS does not recognize the TFSA or the RESP. Withholding taxes apply. In addition, onerous disclosure requirements apply to Canadian resident U.S. citizens as these plans are seen as foreign trusts.

9. Dividends paid by U.S. stocks within corporate class mutual funds are subject to tax. They cannot be sheltered within a corporate class structure.

10. A Canadian who dies with greater than $5.25 million in worldwide assets can be subject to U.S. estate tax on U.S. securities held inside and outside of registered plans. The taxpayer technically has to file a U.S. estate tax return if the total U.S. asset value at death is over $60,000 ­— regardless of being under the $5.25 million threshold.

With the U.S. market looking more attractive these days, there are good reasons to want to own U.S. equities in your portfolio. And it can be done. The trick is to do it as effectively and efficiently as possible.

For more on this or other topics feel free to call, or visit www.ds-online.ca.

 

Jim Grant, CFP (Certified Financial Planner) is a Financial Advisor with Raymond James Ltd (RJL). The views of the author do not necessarily reflect those of RJL. This article is for information only.  Securities are offered through Raymond James Ltd., member-Canadian Investor Protection Fund.  For more information feel free to call Jim at 250-594-1100, or e-mail:

jim.grant@raymondjames.ca.

 

 

Just Posted

Hannes Grosse, left, and Iris Steigemann, right, as they prepared for their 'Moments of Silence' exhibit. The father-daughter duo are showing at The Old School House Arts Centre in Qualicum Beach until June 26. (Submitted photo)
Cortes Island artists exhibit at Qualicum Beach’s TOSH in first father-daughter show

Both artists will be present at shows on Friday, June 25 and Saturday, June 26

The Lighthouse Country Marine Rescue Society will get more funding from the Regional District of Nanaimo. (Submitted Photo)
More PQB communities to fund Lighthouse Country Marine Rescue Society

RDN to introduce amendment to service bylaw contribution

A slide on best practices when reporting a suspected impaired driver that was presented to Parksville city council on June 7 by Margarita Bernard, a volunteer with MADD. The organization’s Report Impaired Drivers campaign involves the installation of informative signs within the City of Parksville. (Mandy Moraes photo)
MADD brings campaign to report impaired drivers to Parksville

Aim is to raise awareness that 911 should be called

Pam Bottomley (executive director), right and Sandy Hurley (president) of the Parksville Downtown Business Association visit the PQB News/VI Free Daily studio. (Peter McCully photo)
PQBeat: Downtown Parksville gears up for post-pandemic bounce back

Podcast: Hurley, Bottomley chat about what’s ahead for the PDBA

Maxwell Johnson is seen in Bella Bella, B.C., in an undated photo. The Indigenous man from British Columbia has filed complaints with the B.C. Human Rights Tribunal and the Canadian Human Rights Commission after he and his granddaughter were handcuffed when they tried to open a bank account. THE CANADIAN PRESS/HO-Heiltsuk Nation, Damien Gillis, *MANDATORY CREDIT*
VIDEO: Chiefs join human rights case of Indigenous man handcuffed by police in B.C. bank

Maxwell Johnson said he wants change, not just words, from Vancouver police

An artists conception of the new terminal building at the Pitt Meadows Regional Airport.
Air travel taking off in B.C., but lack of traffic controllers a sky-high concern

There will be demand for more air traffic controllers: Miller

Canadian Armed Forces experts are on their way to North Vancouver after a local homeowner expressed worry about a military artifact they recently purchased. (Twitter DNV Fire and Rescue)
Military called in to deal with antique ‘shell’ at North Vancouver home

‘The person somehow purchased a bombshell innocently believing it was an out-of-commission military artifact’

Amy Kobelt and Tony Cruz have set their wedding date for February, hoping that more COVID-19 restrictions will have lifted. (The Macleans)
B.C. couples ‘gambling’ on whether COVID rules will let them dance at their wedding

Amy Kobelt and Tony Cruz pushed back their wedding in hopes of being able to celebrate it without the constraints of COVID-19

A plane is silhouetted as it takes off from Vancouver International Airport in Richmond, B.C., May 13, 2019. THE CANADIAN PRESS/Jonathan Hayward
Report calls for airlines to refund passengers for flights halted due to COVID-19

Conclusion: federal help should be on the condition airlines immediately refund Canadian travellers

Green party Leader Annamie Paul speaks during a news conference on Parliament Hill in Ottawa on Tuesday, June 15, 2021. Paul has survived another day of party strife after a planned ouster shifted course, leaving her with a tenuous grip on power ahead of a likely federal election this year. THE CANADIAN PRESS/Justin Tang
Green Leader Annamie Paul blasts ‘racist,’ ‘sexist’ party execs who sought ouster

Fallout has continued, with two of the federal council’s members resigning

Provincial health officer Dr. Bonnie Henry says re-opening B.C.’s border to the U.S. ‘is not in our best interest’ right now. (B.C. Government photo)
Provincial health officer Dr. Bonnie Henry (B.C. Government photo)
B.C. records 113 new COVID-19 cases Wednesday, 4 deaths

Vaccination of young people rising quickly, near 75 per cent

Russian President Vladimir Putin, left, and U.S President Joe Biden shake hands during their meeting at the ‘Villa la Grange’ in Geneva, Switzerland in Geneva, Switzerland, Wednesday, June 16, 2021. (AP Photo/Alexander Zemlianichenko, Pool)
Biden says meeting with Putin not a ‘kumbaya moment’

But U.S. president asserted Russian leader is interested in improved relations, averting a Cold War

Marine biologist Rick Harbo pulls a lid from the Ladysmith harbour, which he uses to monitor the presence of native and non-native species in the Ladysmith harbour. (Cole Schisler photo)
Unidentified sponge may be the latest marine species invading Island harbour

Marine biologist finding dozens of alien species in warm-water Ladysmith Harbour, none threatening

Most Read