CAD to USD in a TFSA or RRSP: What Canadians Need to Know

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Want to buy US stocks or ETFs inside your TFSA or RRSP? You'll need to convert CAD to USD — and how you do that conversion matters a lot. Your broker's default exchange rate can cost you hundreds of dollars, and the wrong account choice means a 15% tax hit on dividends.

Here's what you need to know about converting CAD to USD in registered Canadian accounts.

TFSA vs RRSP for US Investments: Quick Comparison

The key takeaway: US dividends in an RRSP are exempt from the 15% US withholding tax under the Canada-US tax treaty. In a TFSA, that 15% is gone forever — the IRS doesn't recognize the TFSA as a "pension" account.

The Withholding Tax Problem (TFSA)

When a US company pays a dividend to a Canadian TFSA, the IRS withholds 15% automatically. Unlike a non-registered account where you can claim a foreign tax credit, there's no way to recover this in a TFSA.

Real cost example

On a $50,000 portfolio yielding 2%, you lose $150 USD per year — that's $2,250 over 15 years, not counting the compounding effect.

Why the RRSP Is Better for US Dividends

Under Article XVIII of the Canada-US Tax Treaty, "pensions" are exempt from withholding tax. The IRS considers Canadian RRSPs (and RRIFs) as pension accounts:

• US dividends in an RRSP: 0% withholding tax
• US dividends in a TFSA: 15% withholding tax (not recoverable)
• US dividends in a non-registered account: 15% (recoverable via foreign tax credit)

Rule of thumb: Put your US dividend-paying stocks (Apple, Microsoft, Coca-Cola, VTI, VYM, etc.) in your RRSP. Use your TFSA for Canadian investments or US growth stocks that don't pay dividends.

Cheapest Ways to Convert CAD to USD in a TFSA or RRSP

When you convert CAD to USD inside a registered account, your broker typically does it automatically — and charges 1.5%–2.5% on the spread. On CA$10,000, that's CA$150–$250 in hidden fees.

Option 1: Norbert's Gambit (cheapest)

You can use Norbert's Gambit inside a TFSA or RRSP at most brokers:

1. Buy DLR (CAD-denominated) on the TSX
2. Call your broker to journalize the shares to DLR.U (USD-denominated)
3. Sell DLR.U and receive USD in your account

Cost: ~CA$20–$35 total (commission + small ETF spread)

Broker support for Norbert's Gambit in registered accounts

Option 2: Wise + contribute in CAD

If you want USD but haven't contributed yet: convert via Wise (~0.6% fee) outside the account, then contribute the resulting CAD and convert inside, or contribute CAD and use Norbert's Gambit. Wise is ideal for amounts under CA$3,000.

Option 3: Broker auto-conversion (most expensive)

Let your broker handle it. Convenient but costs 1.5%–2.5%. On CA$10,000, you lose CA$150–$250 versus Norbert's Gambit.

Common Scenarios

"I want to buy US stocks in my RRSP"

Contribute CAD to RRSP → use Norbert's Gambit inside the RRSP to convert to USD → buy US stocks directly on NYSE/NASDAQ. This avoids the 15% withholding tax AND the broker's conversion spread.

"I want US exposure in my TFSA"

For a TFSA, you have two choices: buy a CAD-listed US ETF (like VFV) to avoid conversion hassle, or convert via Norbert's Gambit and buy US-listed directly. Either way, you'll pay the 15% withholding on dividends.

"Should I hold VOO or VFV?"

VFV (Vanguard S&P 500, CAD on TSX) and VOO (Vanguard S&P 500, USD on NYSE) track the same index:

• In RRSP: Hold VOO — no withholding tax, lower MER (0.03% vs 0.09%). Convert your CAD to USD via Norbert's Gambit first.
• In TFSA: VFV is simpler (no conversion needed). The 15% withholding applies either way in a TFSA — holding VOO directly doesn't help.

No Capital Gains Tax on In-Account Conversions

Good news: currency conversions inside a TFSA or RRSP are not taxable events. Unlike a non-registered account where converting CAD to USD can trigger a capital gain (or loss), registered accounts are sheltered. No need to track ACB on currency.

Frequently Asked Questions