Is there double taxation of capital gains from sale of Canadian stock held by U.S. citizens?

Asked by: Sandra Philley

Capital gains on publicly-traded securities sold by a Canadian non-resident are not taxable in Canada. In the U.S., your quarterly dividend income is taxable on your U.S. tax return. Your Canadian tax already paid is eligible as a foreign tax credit on filing to help avoid double taxation.

Do US citizens pay taxes on Canadian stocks?

Capital gains taxes are very similar to those incurred when buying United States-domiciled stocks. The Canadian government imposes a 15% withholding tax on dividends paid to out-of-country investors, which can be claimed as a tax credit with the IRS and is waived when Canadian stocks are held in US retirement accounts.

Do US citizens pay capital gains tax in Canada?

Final Tax Liability: One-half of capital gains net of selling costs are subject to tax. For individuals, the maximum rate on a capital gain is approximately 21.46% including the 48% non-resident surtax.
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Is there a double taxation treaty between US and Canada?

The U.S./Canada tax treaty, in summary, alleviates tax issues for U.S. citizens and residents living in Canada and Canadians living in the U.S. Most countries around the globe, including Canada, have some form of income tax that residents are obligated to pay.

How do I avoid capital gains tax on stocks in Canada?

6 ways to avoid capital gains tax in Canada

  1. Put your earnings in a tax shelter. Tax shelters act like an umbrella that shields your investments. …
  2. Offset capital losses. …
  3. Defer capital gains. …
  4. Take advantage of the lifetime capital gain exemption. …
  5. Donate your shares to charity.

Can US citizens buy Canadian stocks?

If you reside in the U.S., you can buy Canadian stocks through American Depository Receipts (ADRs), which allow U.S. citizens to own foreign stocks. You can buy or trade 103 of the largest Canadian corporate stocks on the New York Stock Exchange (NYSE) and another 73 stocks on the Nasdaq exchange.

How do I report Canadian investment income on US tax return?

Complete IRS Schedule B for either your 1040 or 1040A. In sections 1 and 2 you may report all sources of interest and dividend income. According to the IRS, Schedule B may be used to report taxable Canadian interest and dividend income exceeding $1,500.

How are Canadian capital gains taxed?

Capital Gains Tax Rate

In Canada, 50% of the value of any capital gains are taxable. Should you sell the investments at a higher price than you paid (realized capital gain) — you’ll need to add 50% of the capital gain to your income.

What is the capital gains exemption for 2021 in Canada?

For 2021, if you disposed of qualified small business corporation shares (QSBCS), you may be eligible for the $892,218 LCGE. Because you only include one half of the capital gains from these properties in your taxable income, your cumulative capital gains deduction is $446,109 (1/2 of a LCGE of $892,218).