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US dividends and the foreign tax credit, for Canadians

When a US stock pays you a dividend, the US keeps a slice first. In a regular account, Canada gives that slice back as a foreign tax credit, so you're not taxed twice. In a TFSA, you can't claim it.

Beginner guide · 7-minute read · Updated 2026-11-01

The short answer

Three things happen to a US dividend paid to a Canadian.

1. The US withholds tax. With a W-8BEN form on file, the treaty rate is 15% (irs.gov). Without it, the default is 30%.
2. Canada taxes the full dividend. You report the amount before the US tax, in Canadian dollars, at your normal rate. US dividends get no dividend tax credit (canada.ca).
3. Canada credits back the US tax. In a regular account, you claim a foreign tax credit for what the US kept, up to 15% of the gross dividend (irs.gov).

Net effect in a regular account: you pay about your normal Canadian rate in total, split between two countries.

The W-8BEN: one form that cuts the US slice in half

The W-8BEN tells the US you live in Canada and want the treaty rate. You give it to your broker, not to the IRS. Most Canadian brokers ask for it when you first buy a US stock.

You don't need a US tax number for this when the shares trade on an exchange (irs.gov). The form doesn't last forever. It needs renewing every few years, or sooner if your address or other details change. Your broker will ask you to sign a new one.

If you've ever seen 30% taken off a US dividend, the form is missing or out of date. Fix it with your broker first.

A worked example (hypothetical)

You own a made-up US company in a regular Canadian account. It pays you a US$1,000 dividend. We'll use round, made-up numbers: an exchange rate of 1.40 and a Canadian tax rate of 30% on your next dollar. Neither is a real figure for you.

How it adds up: $1,400 gross. The US kept $210. Canada wanted $420 but credits the $210, so you pay Canada $210. Total tax is $210 + $210 = $420. You keep $1,400 − $420 = $980.

Check it a second way: $1,400 × (1 − 30%) = $980. With the credit, you end up paying your Canadian rate once, not twice.

The same dividend in a TFSA

Now hold the same shares in a TFSA. US tax can still be withheld: the C$210. Canada doesn't tax TFSA income, so there's no Canadian tax to subtract a credit from.

And you can't claim that $210 anywhere else. Foreign tax on income inside a TFSA or an RRSP doesn't count toward the foreign tax credit (canada.ca).

So the TFSA keeps C$1,190 of the C$1,400. That's more than the regular account's C$980 this year. But the C$210 is a permanent cost, every year, on every US dividend.

An RRSP is different. US dividends paid into an RRSP or RRIF are exempt from US withholding under the treaty (irs.gov). My guide to where to hold dividend stocks puts all three accounts side by side.

How to claim it

You don't do the math by hand. Your broker's tax slip shows two numbers: the foreign income and the foreign tax paid. Tax software takes it from there.

• The federal credit is worked out on Form T2209 and goes on line 40500 of your return.
• If the federal credit doesn't use up all the US tax, a provincial foreign tax credit can pick up some of the rest.
• Amounts must be in Canadian dollars. Use the Bank of Canada rate for the day you were paid, or its yearly average rate. Most broker slips already do this for you.

One catch: the credit can't be more than the Canadian tax on that income. And it stops at 15% of the dividend. If the US took 30% because the W-8BEN was missing, Canada's credit won't cover the extra. In our example, that's C$420 withheld with only C$210 covered.

What to do with this

• Check your W-8BEN status. It's the cheapest fix in this whole topic.
• Look at the withholding line on a US dividend. 15% means the form is in place. 30% means it isn't. 0% in an RRSP means the treaty exemption is working.
• Put US payers in your RRSP first if you have room. That's the one account where nothing is withheld.
• Don't double-count the dividend. Report the gross amount once. The credit handles the US part.

As of October 2026, the CRA explains the foreign tax credit in its Income Tax Folio S5-F2-C1 on canada.ca. Check it the year you file.

If you reinvest those dividends, each one also raises your adjusted cost base. For the full picture, start with dividend investing explained. And if you sell covered calls on US shares, the wheel strategy covers the option side.

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