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What your US dividends lose before you see them

The United States withholds tax on dividends paid to Canadians. How much, and whether you ever get it back, depends on which account holds the shares and on how you hold them. The second of those two is the one most people have never been told about, and it is where the money is. It runs in your browser. Nothing you type is sent anywhere, and nothing is saved when you leave.

Your situation

This is the input most calculators leave out, and it changes the answer more than the account does.

Withheld at 15%
$300.00

Taken before the money reaches you.

You keep
$1,700.00

Out of $2,000.00.

Can you get it back?
No

There is no Canadian tax on this income to credit it against.

This is the part that surprises people. A TFSA is tax-free in Canada and the US treaty does not recognise it as a retirement plan, so the withholding applies and there is no Canadian tax on the income for a foreign tax credit to reduce. The $300.00 is simply gone, every year, in the account most people assume costs them nothing.

Rates last checked against the Canada and United States tax convention and the IRS non-resident guidance on .

The rule underneath, in three sentences

The United States applies a statutory rate to dividends paid to a non-resident, and the Canada and United States tax convention reduces it for a Canadian resident who has certified their residence on a W-8BEN. The convention separately exempts dividends paid to a recognised retirement plan, which an RRSP and a RRIF are, and a TFSA, an RESP and an FHSA are not. The exemption attaches to the holder of the shares, which is why it survives a US-listed fund bought inside the plan and does not survive a Canadian-listed fund that holds the US shares on your behalf.

Everything else follows from those three. The reason a TFSA is the expensive case is not that it is withheld at a higher rate; it is that a non-registered account can credit the withholding against Canadian tax on the same income, and a TFSA has no such tax to credit it against.

What this deliberately does not do

  • It covers US dividends only. An international fund carries withholding from many countries at many rates, and a US-listed international fund stacks a US layer on top. Neither is modelled here.
  • It does not cover US REITs, MLPs or partnerships. Each withholds differently, and for partnerships the rate is not the treaty rate at all.
  • It does not cover interest, capital gains or return of capital. The convention treats each of them differently from a dividend.
  • It does not cover US estate tax. That is a separate exposure on US situs assets and has nothing to do with withholding.
  • It does not compute your foreign tax credit. The credit is limited to the Canadian tax otherwise payable on that foreign income, so “generally recoverable” is a rule rather than a figure for your return.
  • It does not tell you what to hold. Withholding is one input. Currency conversion costs, the funds actually available to you, and what the rest of your portfolio looks like are others, and this page ranks nothing.

Common questions

Why is US withholding tax charged inside my TFSA?
The Canada and United States tax convention exempts dividends paid to a recognised retirement plan. An RRSP and a RRIF qualify. A TFSA does not, and neither does an RESP or an FHSA, so the treaty rate applies to US dividends they receive. What makes it costly rather than merely annoying is that there is no Canadian tax on that income for a foreign tax credit to offset, so the amount withheld is gone rather than deferred.
Can I claim US withholding tax back?
In a non-registered account, generally yes, as a foreign tax credit against the Canadian tax otherwise payable on that income. The credit is capped at that amount, so it is a general rule rather than a promise about a particular return. In a registered account there is no Canadian tax on the income to credit it against, so nothing recovers it.
Does holding a Canadian-listed ETF change the withholding in my RRSP?
Yes, and this is the part almost nobody knows. The treaty exempts a dividend paid to the plan. If your RRSP holds a Canadian-listed ETF, the ETF is what holds the US shares, and an ETF is not an RRSP. The withholding happens inside the fund before the money reaches your account. The same exposure bought as a US-listed fund in the RRSP itself is what the exemption is available on.
What is a W-8BEN and do I need one?
It is the form that certifies you are a Canadian resident and claims the treaty rate, and in a registered account it is also how the exemption is claimed. Without it your broker withholds at the full US statutory rate. Most Canadian brokers collect it when the account is opened, so it is usually on file, and it is worth confirming rather than assuming.
Does this apply to my non-US foreign holdings?
No. This page is US dividends only. An international fund carries withholding from many countries at many rates, and a US-listed international fund adds a US layer on top of those. That stacking is real and it is not modelled here.

Educational only, and accurate to what you enter. Withholding depends on facts about you that a web page does not have, and it is worth confirming with an accountant before it changes what you hold. For where your US holdings actually sit across your accounts, see asset location across accounts.