Q&A With Gordon Pape: Avoiding Penalties on U.S. Stocks
Financial expert Gordon Pape advises a reader on the rules around TFSAs and U.S. stocks.
Q – In your TFSA book you suggested buying blue chip stocks to boost the value of an account. As Canadians, can we buy U.S. equities or big U.S. dividend stocks without penalties? – Alexandre D.
A – There’s one problem. Dividends paid into a TFSA by a U.S. company are taxed at a 15% rate, and that money is not recoverable. So, the net benefit of U.S. dividends is reduced by that amount. The reason is that the U.S. does not recognize TFSAs as “retirement accounts”. Dividends paid to an RRSP or RRIF are not subject to this withholding tax. – G.P.
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