# US$ in TFSA



## Newby (May 3, 2011)

My wife and I are going to open TFSA accounts an want to use US$. What is the best product and what are the implications.


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## CanadianCapitalist (Mar 31, 2009)

Please provide more details. What do mean by "want to use US$"? Are you looking for a US$ TFSA? Do you just want to hold US stocks within a TFSA?


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## the-royal-mail (Dec 11, 2009)

Are you asking a question? You might do better here if you provide more detail and length in your posts.


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## Newby (May 3, 2011)

*US$ tfsa*

Thanks for replying. We have never opened TFSA accounts and are intending to each open one now by using funds from a US$ savings account. We are very conservative investors and do not want to purchase individual stocks but are unsure what to buy. We do not need access to the money and are willing to let it stay invested for up to five years. Any advice would be appreciated.


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## HaroldCrump (Jun 10, 2009)

Why USD only?
Do you get paid only in USD?


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## the-royal-mail (Dec 11, 2009)

I see. Then I believe you need to convert those USD to CDN first. Then deposit the money. TFSAs (as everything else) operate in CDN dollars. I don't see why you would want or need to operate the account in a foreign currency.


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## atrp2biz (Sep 22, 2010)

USD interest is also very close to zero. There would be very little yield in a USD savings account.


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## humble_pie (Jun 7, 2009)

the thing is, new, tfsas are about the worst kind of account in which to hold US investments.

most here would say that US securities go best in rrsps, where there is no withholding of tax on US dividends. Most brokers offer the currency wash that was pioneered by td waterhouse years ago to avoid FX fees on trades. A few brokers - royal bank, questrade, i believe one other - offer genuine US rrsp accounts.

investors can also consider DRIPPing their US dividends in rrsps, so these dividends will not be subject to FX fees either.

secondbest for US securities would be US cash or margin accounts. US dollar trades & US dividends will be net of FX fees. However, there will be a US withholding tax of 15% on US dividends. The investor can later claim a foreign tax credit for the tax withheld on his canadian tax return, although not always on a dollar-for-dollar basis. However, all this is a bit of a pain.

last of all come the tfsas, where investor will not only get dinged the 15% withholding tax on his US dividends but also he will never be able to claim any foreign tax credit for them.

bref, it's preferable to keep canadian securities in your tfsas.

if you have regular US income such as salaries coming into your canadian accounts, there are several threads in this forum discussing the different ways in which investors can lower, or even eliminate altogether, the infamous FX fees charged by banks & their online brokers.


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## tendim (Nov 18, 2010)

the-royal-mail said:


> I see. Then I believe you need to convert those USD to CDN first. Then deposit the money. TFSAs (as everything else) operate in CDN dollars. I don't see why you would want or need to operate the account in a foreign currency.


To my knowledge the only brokerage that offers a US TFSA is Questrade (at least, up until I left them in February). You can freely back and forth from CAD to USD. If you buy USD securities and have no USD in your account, they will trade at the current ask price to purchase the USD for you, and purchase the securities. 

US dividends are also kept in US funds.


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## humble_pie (Jun 7, 2009)

hi tendim but the point is that with a USD tfsa the investor is going to lose the 15% US withholding tax & he's not going to get any canadian foreign tax credit for it ... questrade US rrsp is a good idea but anybroker US tfsa is a bad idea imho.


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## Newby (May 3, 2011)

Thanks to everyone who replied. It seems clear that TFSAs are not the place for investing US$. To clarify the reason for asking about US$, we have a rather large amount in a basic US$ savings account earning very little interest that is obviously taxed. We thought that a US$ TFSA might provide a tax free haven and better investment opportunities for at least some of the money. Any other thoughts??


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## the-royal-mail (Dec 11, 2009)

I see. So then I would ask, why do you have/keep so much money in the US savings account? Their needs to be a purpose/reason. What is it?

If I were you, I would keep only a minimum amount of cash in that acc't (ie. just the basic amount you need to satisfy the reason for having the acc't). It seems you're making things complicated by wanting to keep so much money there. Convert it to CDN and max out your CDN TFSA or put it in RRSP. 

That's my opinion.


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## humble_pie (Jun 7, 2009)

ok that's clear, thanx for reply. There are really 2 separate issues here.

the first & easier one is that you seem to have tfsa contribution room still open. If you can, git yo max contribution into those 2 thangs asap. One for you, one for your wife. The maximum contribution to a single tfsa to date is CAD 15,000. What you buy with the funds once they're inside the tfsa is a related issue. Even if you settle for hi-interest deposits you will still be better off with these handy tax-prevention accounts than you will be without them.

turning now to your US funds in low-paying savings accounts, low-paying is par for the course. Any numbers of us in this forum have USD in liquid instruments that are paying next to zip. The fact that income tax on zip is almost zero is small comfort.

1) many will chime in with suggestions of broad-based US etfs with dividends. These would be good ideas, imho. You will have a foreign tax credit to work out in 2012 for the 15% withheld on the US divs, but the for tax cr is not that difficult a calculation to prepare. It will reduce your canadian inc taxes owing.

2) you might also consider individual US stable large caps w good dividend histories. I for one am mildly pleased with merck, for example. Plus it has options, which i like to sell.

3) another way in which you could deploy your US dollars while keeping your actual investments close to the home territory is to buy quality canadian interlisted stocks on US markets. An example would be CN rail, whose US symbol is CNI. Other examples would be our chartered banks, all of which trade on new york; and also all of our big energy, mining & fertilizer companies. Keep in mind, though, that commodity stocks are currently in the dog house. 

in fact nearly every canadian company is interlisted in one way or another; but if you are beginning investors i would hope that you would stick to the big names that trade in fairly high volume both on toronto & in the US.

once you've bought these canadians with your US dollars on new york or on nasdaq, you'd want to move the shares into your canadian accounts with the same broker, so as to receive dividends in CAD & not pay any FX fees on the divs (there are a few exceptions, which are canadian companies that pay their dividends initially in US dollars ... more on this if you really want to know, but i'll skip the boring details for the nonce.)

another huge advantage of buying interlisted canadian shares on US exchanges with your US dollars is that you will eventually be able to sell these shares on toronto & receive canadian dollars without paying any foreign exchange fee whatsoever. This is a partial version of a sophisticated operation called a gambit. A real gambit is a pair of trades done instantly; whereas what you would be doing is a relaxed & sedate kind of half-gambit; but it would ultimately bring your funds home to canadian dollars without any foreign exchange charges at all.

4) lastly, there are always wild & furious speculations in US funds, which you will also see touted in this forum. In fact there's one being promoted nearby, this morning. I do sincerely hope you will avoid these until you become experienced investors, at which point a few limited speculations might become quite fun.


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## cardhu (May 26, 2009)

Newby ... be careful about the advice you get from an anonymous internet forum. 

Your initial thinking was correct. US-based investments would usually fare better in a tax-sheltered account than a taxable account, especially if there is any substantial dividend income flowing from them. However, your choice of tax-shelter (TFSA) isn’t ideal. The RRSP is, in most cases, the best place to hold those investments. If you don’t have room in your RRSPs, then a TFSA is usually the second best choice, with a taxable account placing a far distant third ... a taxable account is about the worst type of account in which to hold income-producing US investments.

Placing US-based dividend payers in a taxable account, in an effort to “preserve” the foreign tax credit, is much like paying a dime to save a nickel. You may get your nickel, but at the end of the day, you will be poorer for having done so. 

You also do not need to convert your existing US cash to Cdn before opening a TFSA ... and indeed it would be silly to do so if your intention is to purchase US$ securities. There are currently two brokers that offer US$ TFSAs (RBC and QuestTrade). These accounts operate in US$, not Cdn$. Your TFSA limit, however, is measured in Cdn$, so you would need to be cognizant of the exchange rate on the date of the transfer, so you can keep track of how much of your contribution room you’ve actually used. For example, if you have a $15,000 TFSA limit, and you decide to shift US$10,000 into the account, and the C/U exchange rate on the date of the deposit is 1.05, then you’d have used up only $9,524 of your limit, leaving you with $5,476 unused contribution room. 

Both brokers also offer US$ RRSPs.


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## Newby (May 3, 2011)

Thank you for the info. Very interesting and informative. Glad I decided to join this forum.


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## Newby (May 3, 2011)

Good advice but rest assured that I am only looking for opinions and not absolute direction. I really appreciate the perspective you provided. Thanks for taking the time!


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## My Own Advisor (Sep 24, 2012)

Thinking about buying POT.TO (Potash) but would like to hold in USD $$ TFSA.

Another option is to hold Potash (that pay dividends in USD $$) in the RRSP. Thoughts?

How and where do others hold their Canadian investments that pay dividends in USD?


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## Synergy (Mar 18, 2013)

My Own Advisor said:


> Thinking about buying POT.TO (Potash) but would like to hold in USD $$ TFSA.
> 
> Another option is to hold Potash (that pay dividends in USD $$) in the RRSP. Thoughts?
> 
> How and where do others hold their Canadian investments that pay dividends in USD?


I hold POT in a non-registered US account at TD. Purchased on the canadian side and journalled the shares over. Currently I prefer accumulating US dollars when I can - regardless of the savings on fx fees.


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## humble_pie (Jun 7, 2009)

My Own Advisor said:


> Thinking about buying POT.TO (Potash) but would like to hold in USD $$ TFSA.
> 
> Another option is to hold Potash (that pay dividends in USD $$) in the RRSP. Thoughts?
> 
> How and where do others hold their Canadian investments that pay dividends in USD?



advisor u know the drill by now.

the drill says don't hold USD dividend payors in registered accounts unless such account is lodged at a dual-currency CAD/USD broker such as bmo, questrade, roybank ...

if u hold USD dividend payors in registered account at a monocurrency CAD-only broker - i believe yours is TD - you will be charged an FX fee on the dividends.

all this is old information that is well known.

however, an interesting new wrinkle in the ongoing FX-fees-on-USD-dividends saga is unfolding right now at TD. I've written about this new wrinkle & as i recall you responded accurately, so i do believe you are knowledgeable about it.

the new wrinkle, which has not been tested yet by clients, is described as a patch that will wash incoming USD DRIP dividends in registered accounts so there will be no FX fee.

however, when i inquired of my TD source - a high-level source - whether this new patch would wash *all* USD dividends in registered or *only* DRIP dividends, i received the response that it will apply *only* to DRIP dividends.

in time, of course, this lopsided policy is going to cause a migration of USD dividends in TD rrsp & tfsa accounts from cash into DRIP divs.

what i'm suggesting to you is that you might consider DRIP dividends in Potash in a TD registered account if - but only if - the new wash patch comes into effect.

if you phone the big green about this, you are quite likely, at the present moment, to meet up with a blanket denial. It is unfortunate, but TD is not training its staff at a uniform rate. Some - mostly senior ex-PA or resource staff - are already knowledgeable. But many other representatives are not.

advisor if perchance you do stumble upon a senior resource person who is in the loop, might you be kind enough to post the gist of his remarks here? this initiative would help others. You see, if the promised DRIP patch does work, it will be the very first time that USD dividends can be paid into a TD registered account without foreign exchange fees.


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## My Own Advisor (Sep 24, 2012)

Thanks Synergy. Before a run up with BPO and after selling some, I kept BPO in a US non-reg. account. BPO pays dividends in USD. Purchased BPO on the CDN side and journalled over like you.

I will probably do the same with POT.


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## My Own Advisor (Sep 24, 2012)

@humble,

Yes, I suspect I know the drill 

I was thinking of opening a new USD $ TFSA account, but the headaches of managing multiple accounts at multiple institutions is something I don't want to deal with.

The "monocurrency" brokers are starting to get to me....

Yes, I recall your posts about the upcoming washing of dividends in USD for stocks running a DRIP. I'm looking forward to being a 'test case' for this 

I intend to call TD to ask again about USD $ registered accounts and when I do, enquire whether this new patch you speak of will wash *all* USD dividends in registered accounts or otherwise, just dividends associated with DRIPs.

You said December 31st the patch would be in place?


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## humble_pie (Jun 7, 2009)

là i posted about this already advisor! it will be *only* a wash for DRIP dividends in TD registered accounts. Cash divs will remain subject to the usual FX charge. I've double-checked this with my source & posted. CC asked about this very same issue. A while ago, i believe the topic has its own thread.

i'm running a test myself. It's possible the first "washed" DRIP dividend has come through already. It's in goldcorp, which is a payor of USD divs but - unlike a US publicly traded corporation - goldcorp is an interlisted canadian stock.

if that was a "washed" dividend, then i see a problem with what TD is doing - a problem from the client's perspective.

goldcorp pays monthly dividends, so another GG DRIP dividend arrives payable tomorrow. I'm waiting to see what they will do with this one.

only after that will i query the source about what i'm seeing. It's the holidays, so all queries will be slow.

another caution: none of the rookies the TD has hired recently knows anything about this issue. It's way over their heads. Even among the senior ex-P team managers, only some know, or they've been astute enough to figure things out. Others - including very bright PA team & resource managers - are still in the dark.

i'm stating this because if you phone them, you will likely hear a denial. There's been a gigantic personnel shakeup at the big green - in early november - & certainly not for the better, from a customer's point of view. But that's another issue entirely. Not going there now.


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## My Own Advisor (Sep 24, 2012)

@humble,

I'm simply glad you know the brass at TD 

Yeah, all queries will be slow.

Your G.TO stock is a good example of what you expect to happen. I don't have any interlisted payers in my RRSP yet. Likely POT.TO soon though, hence the question about using the RRSP vs. USD $ TFSA.

I don't call TD very often. You suspect the customer service is going to dive?

Back to G, looking very attractive in the $22 range I must say.


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## Taraz (Nov 24, 2013)

Is this money from working in the States? If so, you should see if you can open an IRA - some of them can be a better deal than a TFSA with the reciprocal tax agreements.


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## alingva (Aug 17, 2013)

For US taxpayers TFSA is not a tax free account


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