Investors Ask: Can I Buy US Stocks with My TFSA?

By Remitbee - Dec 31, 2021

A Tax-Free Savings Account or TFSA is a registered, tax-advantaged savings account that allows account owners to earn money tax-free. The Canadian government introduced this type of account in the country in 2009 as an incentive for eligible Canadians. Canadian residents 18 years old and above with a valid Social Insurance Number (SIN) can apply for a TFSA.

A TSFA account is an investment account that allows you to hold a variety of qualified investments, including:

  • Cash
  • Mutual funds
  • Stocks
  • Bonds
  • Guaranteed Investment Certificate (CIGs)

The good thing about using TFSA for your investments is that if your stocks or bonds are doing well, you can be sure that the amount you earn once you sell them will not be charged with tax. You can also withdraw money without taxes or penalties.

One thing to remember, though, there’s a limit on how much you can deposit in your TFSA account. Once you hit the age of 18, you get additional contribution room for your TFSA each year. The annual TFSA contribution limit this 2021 is $6,000. So, for 2009 to 2021, the total available contribution room for a TFSA account holder is $75,500.

If you want to find out how much your contribution limit is, the easiest way is to log on to your Canada Revenue Agency or CRA account and there you will find how much your limit is.

Can I Buy US Stocks Using TFSA?

The simple answer: yes. This is as long as the US stocks you want to purchase are listed on a designated stock exchange. And as far as you are buying US stocks using your TFSA, the dividends, interest, or capital gains you earn from your US stocks will not be taxed. However, depending on the type of return you receive on your US stocks in your TFSA, you may be required to pay US withholding tax.

Investing in US stocks using your TFSA is ideal, especially if you want to diversify your investment portfolio. That way, you can invest in some of the largest companies in the US and not miss out on the largest market in the world.

Investing in the US market exposes you to every industry, especially its strong technology industry dominated by big names such as Microsoft, Amazon, Google, Apple, and Facebook.

How to Buy US Stocks Using TFSA?

There are two choices to choose from if you want to buy US stocks using your TFSA.

First, you can get a USD-based TFSA and deposit USD in your account to buy your US stocks. Another option is to use your CAD account, go through your stock trading platforms. These platforms automatically convert your CAD to USD, which you can use in buying US stocks. However, your brokers will charge conversion fees which are around 2-5 percent when you buy AND sell your stocks.

Fluctuations and Foreign Exchange Rate

When investing in US stocks in Canada, the fluctuation in forex often affects the money you earn or spend on your investments. Depending on the strength of CAD relative to USD, your earnings can go high or low when you sell your US stocks in the market. Moreover, it will also affect your purchasing power, especially when converting your CAD funds to USD to buy US stocks.

RemitBee: Offering the Best Currency Exchange Service in Canada

Let’s say you plan on exchanging your CAD to USD in funding your USD account to invest in US stocks. Instead of going to the bank or financial establishments that offer currency exchange, with high fees and low rates sign up for a RemitBee account!

RemitBee’s sting-free currency exchange service allows you to convert your fund online for free anytime and anywhere. Simply plug in the CAD amount you want to convert, and you instantly see how much it is in USD.

Because we operate online, there’s no need to go to the bank and fall in line. Plus, you get the best currency exchange rate in the market when you exchange your currency with us. Banks usually charge 3 to 5 percent for conversion, but with us, only a margin of .03 to .06 percent is added, allowing you to gain 10x more value in your currency exchange rate.

With RemitBee, you can convert up to 1 million CAD per day. Plus, the money you exchange and transfer using our platform is 100% insured.

So, if you are planning to invest in US stocks to diversify your investment portfolio or simply tap into the strong US stock in the market, look no further. RemitBee is your best partner in currency exchange.

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