When choosing brokerages for a crossborder situation, you need to be a little bit careful. Laws change over the years, and in response, brokerages change their policies toward non-resident investors. When evaluating whether or not a brokerage would be a good fit for your situation, I strongly encourage you to contact them directly and ask questions. For examples of the types of questions I would ask, along with my experience of looking at brokerages in 2020 and 2021, please see below.
2023 Update: I’m happy to report that the info below remains accurate. We’ve kept the same brokerage set up with no issues. In addition, if things change, I found another option for potentially holding an IRA. IRA Financial enables you to set up a self-directed IRA. I reached out to them, and they’re happy to work with US citizens living in Canada. This is a more expensive option than a traditional brokerage, but it might be useful in a pinch.
What to Look for in US Brokerages?
Because of the paperwork required on there end, many US brokerages have restrictions on non-US-resident US citizens. In my experience, Vanguard (a brokerage which is otherwise great) is very unfriendly to Canadian-resident US citizens, effectively freezing retirement accounts. TIAA, on the other hand, was even willing to hold taxable accounts when I spoke to them. So there is a lot of variety and, unfortunately, the rules change from time to time. You can find my list of questions below, along with a summary of the answers I found in 2020 and 2021. You can see how I chose my Canadian brokerage further down the page.
Here are the brokers I would recommend checking with about their policies regarding non-resident US citizens. I spoke to all of them at various points in planning our move. We ended up at a few of them, because we already had accounts there. I’m tempted to consolidate, but since these policies change I kind of like being spread across brokerages.
- Schwab International – 877-853-1802
- Fidelity – 800-343-3548
- TIAA – 800-842-2252
- TD Ameritrade – 800-669-3900
- Interactive Brokers – 877-442-2757
Questions
Do you allow US citizens who are Canadian residents to hold taxable accounts and trade in them normally?
Answer we’re looking for: Yes. The only US brokerage I found that said yes to this was TIAA, and they require that any accounts you are planning to hold with them are opened before you move. The good news is that it’s easy (but not so quick) to move your USD taxable account as a transfer in kind to a Canadian brokerage. More on that below, in the section of choosing a Canadian brokerage.
Do you allow US citizens who are Canadian residents to hold retirement accounts and trade in them normally?
Answer we’re looking for: Yes. Many US brokerages allow this, including Fidelity, TD Ameritrade, TIAA and Schwab. Vanguard and Interactive Brokers did not.
Do you allow US citizens who are not US residents to open accounts?
Answer we’re looking for: Yes. The only one I spoke to who was willing to do this was TD Ameritrade. Fidelity allows you to open a different account type (e.g. a traditional IRA) as long as you have another account with them (e.g. a Roth IRA). TIAA and Schwab only allow you to keep existing accounts. One note: TD Ameritrade was recently acquired by Schwab, so this one could change.
What are your account fees and commission prices?
Answer we’re looking for: As low as we can. All of the brokerages I looked at were decent but, depending on your investments, some might be better than others.
What To Look For in Canadian Brokerages?
As I have often found in crossborder financial issues, the Canadian side of things is pretty straightforward. Canadian brokerages are happy to do business with US citizens living in Canada. I personally chose to use Questrade, but Qtrade also looks good.
Sept. 2021 update: National Bank Direct Brokerage offers commission free buying and selling of US and Canadian ETFs and stocks. There is a $100 annual administration fee, but it is waived with balances greater than $20,000 AND 5 or more trades per month. Since I don’t trade that often, I’m sticking with Questrade.
Questions
Do you provide 1099s for non-registered (aka taxable) accounts?
Answer we’re looking for: Yes — that will make your US tax return much easier. Questrade, Qtrade and National Bank Direct Brokerage all do this.
What are the fees associated with your accounts?
Answer we’re looking for: As low as possible.
- Questrade’s fees and commissions
- Qtrade’s fees and commissions
- National Bank Direct Brokerage’s fees and commissions
Do you have commission-free trading for ETFs (and, if so, which ETFs)?
Answer we’re looking for: Yes! I chose Questrade because they allow you to buy any ETFs for free, including the two I use in my non-registered USD account – VTI and VXUS. To sell shares will cost between $4.95 and $9.95, depending on the number of shares. Qtrade allows you to buy AND sell ETFs for free, which is very tempting, but the list of ETFs doesn’t include the two I use, or close analogs — they seem to be more sector / region specific. I suspect you could come up with a good portfolio, but I haven’t taken the time to really investigate. Plus, I’m soon going to stop earning in USD, and I won’t hold ETFs in CAD in my non-registered account (to avoid PFIC filings) so this may become moot.
Do you offer USD non-registered accounts?
Answer we’re looking for: Yes. This is very important if you have taxable USD investments. I couldn’t find a brokerage who would let me keep those in the US, so you’ll likely have to move them to Canada. And by keeping your US-listed ETFs in USD, you can avoid PFIC filings. Questrade, Qtrade and National Bank Direct Brokerage all offer this.
Conclusion
When I went through this process in 2020 / 2021, I ended up keeping most of our registered (aka tax-sheltered) accounts with their US providers, with the exception of Vanguard. TD Ameritrade is particularly useful, as they were the only US brokerage I found that allowed new US citizen customers to open retirement accounts while resident of Canada. And for our taxable account, we moved our USD from Vanguard to Questrade.
Now that you’ve got your accounts in place, let’s take a look at our asset allocation.
Moving Money | Table of Contents | Choosing an Asset Allocation
A quick question about your USD non-registered accounts in Canada. It looks like Canada will tax 50% of capital gains at one’s marginal tax rate, which is presumably higher than the 15% capital gains rate in the US. Are your Questrade accounts, though in USD, subject to Canadian capital gains? Thanks!
Great question! Yes, our USD holdings are subject to Canadian capital gains. As far as the tax rate, it’s a bit complicated, since my wife and I have very different marginal rates (and have joint ownership of the investment account). Last year, I had a marginal rate for capital gains of 21.75% (combining provincial and federal taxes) while my wife’s was just 12.16%. So, effectively, we paid ~17% on capital gains.
One way to potentially reduce this would be to shift our taxable account to an individual account just in my wife’s name. We’ve done this with our high interest savings account, but not (yet) with our joint brokerage account.
One other thing to note — the cost basis for capital gains is set on the day you take residency. Thus, even though we’ve held these investments for much longer, as far as Canada is concerned, the cost is their value as of July 2020.
To follow up on this, I reached out to my tax person, and he said that while it is permissible to transfer assets to a spouse as a non-taxable event, the capital gains liability on any gifted assets remains with the original person. In other words, I could transfer my half of our joint account to my wife, but I’d still owe taxes on the gains on the shares that used to be mine.
To get around that, I could give her a loan, but that requires her paying me back with interest. And, with interest rates so high, it probably isn’t worth it.
Here are a couple of useful links that he shared as well:
Spousal attribution rules: https://www.taxtips.ca/personaltax/attribution-rules-re-gifts-transfers-loans-to-spouse-or-related-minor-child.htm
Spousal loans: https://www.taxtips.ca/personaltax/lend-to-spouse-child.htm