Withholding taxes can come into play when you’re considering whether to hold U.S. stocks in a TFSA or RRSP. Knowing where your U.S. stock should be held will help you get the maximum benefit from your investment. For instance, if you have a blue-chip U.S. stock, then you need to consider if your return, even after the 15% IRS withholding tax, will leave you with a better return than Canadian investments. The timing of your retirement can also help determine where you should hold your investments. An RRSP is a better account to keep U.S. stocks, unless you plan on retiring soon in which a TFSA makes more sense.

Key Takeaways:

• If you own U.S. stocks, the IRS requires that taxes are withheld regardless of the fact that the stocks are held in a tax-free TFSA account.
• The IRS does not levy withholding taxes on U.S. investments held in an RRSP.
• If you are unsure about the tax implications, including how provincial taxes will affect your investments, always seek professional advice.

“If you are intending to hold for a long time, then moving your stocks to your RRSP account and holding Canadian investments in your TFSA may be a good strategy.”

Read more: https://www.moneysense.ca/save/taxes/is-it-better-to-hold-u-s-stocks-in-a-tfsa-or-rrsp/