# Any US CITIZENS? Best way to pay least in taxes for stock investing :confused:



## Vicjai (May 15, 2015)

Hi guys, I understand this is the Canadian Money Forum but this is a question about money and investing. Forgive me, but I hope some experts here can answer about US investment accounts as my cousin is from the states and he's pretty young (early 20s) wanting to start stock investing. Here goes:

If he (US citizen, non Canadian) starts to invest, which route to take is best? What is the best way to pay the least amount of taxes? 
I know Canada has TFSA, but are there something similar in the US they can take advantage of?

Thanks for anyone who contributes to this thread, I'm just trying to point him in the right direction. each:


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## Eclectic12 (Oct 20, 2010)

... never investigated the details but I am aware of:

Traditional IRA ...
http://beginnersinvest.about.com/od/iras/

Roth IRA ...
http://en.wikipedia.org/wiki/Roth_IRA

If there is an employer, maybe there's a 401(k) ...
http://en.wikipedia.org/wiki/401(k)

Tips from US gov't ...
http://www.usa.gov/topics/money/investing/tips.shtml


As a US citizen, where he is not a Canadian tax resident ... if he buys a Canadian dividend paying company, he will be subject to the non-resident withholding taxes on dividends that the Canadian gov't charges at a reduced rate due to the Canada-US tax treaty.


Cheers


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## james4beach (Nov 15, 2012)

He must also avoid Canadian mutual funds and ETFs, as they are categorized by the US govt as PFICs and are subject to weird tax rules.


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## brad (May 22, 2009)

james4beach said:


> He must also avoid Canadian mutual funds and ETFs, as they are categorized by the US govt as PFICs and are subject to weird tax rules.


Only outside of an RRSP. If you're investing in an RRSP there's no problem investing in Canadian mutual funds and ETFs.


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## Vicjai (May 15, 2015)

So guys, does that mean he can buy individual stocks in an IRA and/or RRSP?

How do people in US buy stocks to minimize tax?


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## brad (May 22, 2009)

Vicjai said:


> So guys, does that mean he can buy individual stocks in an IRA and/or RRSP?
> 
> How do people in US buy stocks to minimize tax?


If he's not a Canadian I don't think he can get an RRSP anyway; I didn't spot the part where you said he's living in the US and is a US citizen (not Canadian). That means this is a totally US question and you might get better answers on a US investing/financial board. Check out Bogleheads unless he's dead-set on individual stocks (as opposed to long-term investing in index funds).


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## Eclectic12 (Oct 20, 2010)

brad said:


> Only outside of an RRSP. If you're investing in an RRSP there's no problem investing in Canadian mutual funds and ETFs.


To use an RRSP, I believe the OP's cousin would have to be a tax resident of Canada *and* have enough earned income to generate the RRSP contribution room.

I'm thinking he is not a tax resident of Canada as part of the question is


> ... are there something similar in the US they can take advantage of?


 This says to me that we are talking about a US citizen who is residing in the US somewhere ... but it is an important point for the OP to confirm.


Note that if the cousin is a US citizen residing in Canada ... that could mean two tax returns to file (one for Canada and one for the US) as well as a much more complicated tax situation.


The links I was posting were for US citizens who are residing in the US.

Cheers


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## Eclectic12 (Oct 20, 2010)

brad said:


> If he's not a Canadian I don't think he can get an RRSP anyway ...


I don't believe citizenship is a requirement as ...


> Ms. Fung could not immediately take advantage of the tax and savings benefits of an RRSP. That’s because RRSP contribution room is based on a percentage of income earned from the previous year. For immigrants just starting their lives – and careers – in Canada, this adds up to zero RRSP contribution room.


http://www.theglobeandmail.com/glob...e-waiting-for-rrsp-eligibility/article549555/


Most immigrants I know did not get citizenship right away where the article is saying a lack of Canadian earned income to generate RRSP contribution room is the barrier, rather than citizenship. I have yet to find definitive proof on way or the other, though.



Cheers

*PS*

This link says ...


> You are eligible to open an RRSP if you:
> 
> Are a Canadian resident for tax purposes* and file income taxes in Canada;
> Are 71 years old or under; and
> ...


http://settlement.org/ontario/daily-life/personal-finance/financial-planning/what-is-an-rrsp/


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## Vicjai (May 15, 2015)

Eclectic12 said:


> To use an RRSP, I believe the OP's cousin would have to be a tax resident of Canada *and* have enough earned income to generate the RRSP contribution room.
> 
> I'm thinking he is not a tax resident of Canada as part of the question is This says to me that we are talking about a US citizen who is residing in the US somewhere ... but it is an important point for the OP to confirm.
> 
> ...



Yes eclectic, brad, james, its US citizen residing in US. Nothing Canadian.


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## brad (May 22, 2009)

Vicjai said:


> Yes eclectic, brad, james, its US citizen residing in US. Nothing Canadian.


Okay, that's why I don't think it makes sense to ask this question on a Canadian finance board. There's no Canadian connection and we're all confused. ;-)

I would try Bogleheads (as I mentioned above), which is a forum on index investing. If he's not interested in index investing and prefers to invest in individual stocks instead, I'm sure there are investing forums for that as well. It depends on his goals: if he wants to invest for retirement it's a very different kettle of fish than if he's investing for a short-term goal or just to "get rich quickly."


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