Q: Hi 5i Team - I am interested in buying more U.S. stocks and have a non-registered U.S. dollar account as well as a TFSA account in Canadian dollars. Are there any concerns over buying U.S stocks in the TFSA account? eg. Are U.S. capital gains and dividends still tax exempt in a the TFSA. Any advice as to preferences re which account to use would be appreciated.
5i Research Answer:
Capital gains on US stocks are tax-exempt in a TFSA (except limited partnerships). BUT...on US dividends there is still a 15% withholding tax in a TFSA. If the dividend yield is high, for most investors it is better then to hold these in a cash account or RRSP (no withholding tax in an RRSP). But for a US company with no dividend, all gains will be tax free in a TFSA.