US stocks in a TFSA
US stocks in a TFSA
Up until now I haven't held US stocks in my TFSA although I have done well with CA. Do you have to have 2 separate TFSA's or are they just converted to CA $'s? in the one acct.
Re: US stocks in a TFSA
Depends on which broker your account is at.
Peter
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Patrick Hutber: Improvement means deterioration
Re: US stocks in a TFSA
At TDDI you can open separate CAD and USD TFSAs.
If you want to transfer sums that are large between the accounts, consider using Norbert's Gambit.
Remember that dividends on U.S. equities are subject to withholding tax (unless they are in a RRSP). In a TFSA, you pay the withholding tax, but cannot claim credit for this, and so cannot get a refund from CRA (unlike in a non-registered account, where you can). With yields on U.S. equities currently averaging around 2 per cent (see e.g. VTI), that means a loss of some 50 basis points. If you tilt toward low-dividend stocks, you can reduce that. But then your return will be mostly in the form of capital gains. If these were in a regular account, they would be taxed at a 50 per cent inclusion rate. So holding growth U.S. equities in a TFSA costs you the foregone benefit of a lower tax rate.
One possibility is to hold Canadian fixed income in your TFSA and equities elsewhere. But if equities outperform fixed income, as they often do, you are using the TFSA to shelter from taxes a relatively low-yielding product.
I know of no general answer to this conundrum. Each investor must look to his or her own situation. But they should at least be aware of the issue.
George
If you want to transfer sums that are large between the accounts, consider using Norbert's Gambit.
Remember that dividends on U.S. equities are subject to withholding tax (unless they are in a RRSP). In a TFSA, you pay the withholding tax, but cannot claim credit for this, and so cannot get a refund from CRA (unlike in a non-registered account, where you can). With yields on U.S. equities currently averaging around 2 per cent (see e.g. VTI), that means a loss of some 50 basis points. If you tilt toward low-dividend stocks, you can reduce that. But then your return will be mostly in the form of capital gains. If these were in a regular account, they would be taxed at a 50 per cent inclusion rate. So holding growth U.S. equities in a TFSA costs you the foregone benefit of a lower tax rate.
One possibility is to hold Canadian fixed income in your TFSA and equities elsewhere. But if equities outperform fixed income, as they often do, you are using the TFSA to shelter from taxes a relatively low-yielding product.
I know of no general answer to this conundrum. Each investor must look to his or her own situation. But they should at least be aware of the issue.
George
The juice is worth the squeeze
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Re: US stocks in a TFSA
So 50% is less than 0%???So holding growth U.S. equities in a TFSA costs you the foregone benefit of a lower tax rate.
I might argue that the TFSA is the best place to hold growth equities - as long as you are sure that they will grow.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
Re: US stocks in a TFSA
No, 50% is less than 100%. If I use my TFSA to shelter a fixed income instrument, I will have sheltered 100% of whatever my marginal tax rate is. If I use my TFSA to shelter an equity returning capital gains, I will have sheltered 50% of my marginal tax rate.Shakespeare wrote: ↑28 Jan 2018 22:14So 50% is less than 0%???So holding growth U.S. equities in a TFSA costs you the foregone benefit of a lower tax rate.
If one feels confident that equity returns will exceed fixed income returns by enough to outweigh this tax advantage, then I think that one should be short bonds, investing the proceeds into equities
George
The juice is worth the squeeze
Re: US stocks in a TFSA
One thing to keep in mind is that you cannot withdraw US funds form your TFSA.
For whatever reason withdrawal have to be in Canadian Dollars.
For whatever reason withdrawal have to be in Canadian Dollars.
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
Re: US stocks in a TFSA
At TDDI you can, albeit with a hoop to go through:
1. in the TFSA, you buy a US$ MMF;
2. you withdraw in kind the US$ MMF to a non-registered account;
3. you sell the US$ MMF in non-registered and you have the US$ cash.
finiki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
Re: US stocks in a TFSA
If that is the case you should be able to do the same thing with a US stock.
I also guess you could us interlisted stocks to accomplish the same thing.
I had assumed the reason for only Canadian dollar withdrawal was ease of keeping track of withdrawals and contributions
I also guess you could us interlisted stocks to accomplish the same thing.
I had assumed the reason for only Canadian dollar withdrawal was ease of keeping track of withdrawals and contributions
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
Re: US stocks in a TFSA
Thank you for all your replies. My reason for the inquiry was to broaden the exposure in my TFSA now it has reached the $100M mark. Perhaps I should buy some EFT's such as VEE, XID, or ZUH. Seems like individual stocks are a bit problematic.
Re: US stocks in a TFSA
$100 million TFSA? You have done extraordinarily well.
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Last edited by AltaRed on 29 Jan 2018 22:14, edited 1 time in total.
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Re: US stocks in a TFSA
That may be a freudian typo!
OP, you may also want to consider HXS for TFSA. It is designated in CAD, and makes no distribution, One of the arguments against holding US stocks in TFSA is that the any dividend distributions are considered taxable. HXS does not really distribute anything, and hence gets around the problem.
- ukridge.
OP, you may also want to consider HXS for TFSA. It is designated in CAD, and makes no distribution, One of the arguments against holding US stocks in TFSA is that the any dividend distributions are considered taxable. HXS does not really distribute anything, and hence gets around the problem.
- ukridge.
Re: US stocks in a TFSA
30 basis points.
HXS charges a 30 bp swap fee so not sure what this is suppose to accomplish.ukridge wrote:OP, you may also want to consider HXS for TFSA. It is designated in CAD, and makes no distribution, One of the arguments against holding US stocks in TFSA is that the any dividend distributions are considered taxable. HXS does not really distribute anything, and hence gets around the problem.
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Re: US stocks in a TFSA
Good point about considering HXS for it's lack of distributions.ukridge wrote: ↑29 Jan 2018 22:08 That may be a freudian typo!
OP, you may also want to consider HXS for TFSA. It is designated in CAD, and makes no distribution, One of the arguments against holding US stocks in TFSA is that the any dividend distributions are considered taxable. HXS does not really distribute anything, and hence gets around the problem.
- ukridge.
However, YMMV as to whether one cares all that much about paying the US 15% withholding tax. Where there isn't a suitable no distribution alternative like where one wants to hold Apple directly, a top income earner may consider losing the US 15% withholding tax on the 1.46% dividend versus paying the Canadian 40+% on the distribution cheap.
There are other reasons such as avoiding currency conversions, having no RRSP contribution room or having a similar income in retirement so that the RRSP isn't all that attractive.
Cheers
Re: US stocks in a TFSA
Oh my! This a very timely thread. I was just in the process of converting my TFSA from cash (GIC's) to index funds and the available funds I was going to use are USD. This info changes my plans! Thanks.
Ken
Re: US stocks in a TFSA
can you explain how you got your TFSA up 100 million? Quite frankly I don't believe you.May-be you meant 100k.
Re: US stocks in a TFSA
In one convention:
$1M = $1,000
$1MM = $1,000,000
$1MMM - $1,000,000,000
M stands for mille (French for a thousand)
MM stands for mille de milles (thousand of thousands) and so on.
finiki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
Re: US stocks in a TFSA
sorry for my poor French. Thank you for your assistance .adrian2 wrote: ↑24 Feb 2018 16:16In one convention:
$1M = $1,000
$1MM = $1,000,000
$1MMM - $1,000,000,000
M stands for mille (French for a thousand)
MM stands for mille de milles (thousand of thousands) and so on.
Re: US stocks in a TFSA
I came across an annoying quirk in TDDI system.
I bought US stock in a US dollar TFSA. I have DRIP flag set on the entire account. The stock paid a dividend on Friday. TDDI executed the transactions in the following order:
- credit the dividend
- drip the dividend (almost the entire dividend amount dripped)
- debit 15% withholding tax
I ended up with a negative cash balance in the TFSA. My contributions are already at the max, so I can't add more cash. I will call on Monday to sell one share to cover the negative balance.
A more sensible order of transactions would be:
- credit the dividend
- debit 15% tax
- drip the remainder
I bought US stock in a US dollar TFSA. I have DRIP flag set on the entire account. The stock paid a dividend on Friday. TDDI executed the transactions in the following order:
- credit the dividend
- drip the dividend (almost the entire dividend amount dripped)
- debit 15% withholding tax
I ended up with a negative cash balance in the TFSA. My contributions are already at the max, so I can't add more cash. I will call on Monday to sell one share to cover the negative balance.
A more sensible order of transactions would be:
- credit the dividend
- debit 15% tax
- drip the remainder
Re: US stocks in a TFSA
When I had a similar issue, TDDI just credited my account when I called them. Or if you have some cash in your CAD TFSA, you could transfer it to the USD side.
Re: US stocks in a TFSA
I owe them about $35. I doubt they will just gift it to me.
No cash on the CAD side... that would be too easy.
Re: US stocks in a TFSA
Have you talked to anyone at the bank?
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
Re: US stocks in a TFSA
Why not explain the situation and have them revese the process. That might be all it takes.
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard