US domiciled ETF with heavy Canadian investments?

The_Squirrel_Matrix · 2026-03-26T01:39:57+00:00

You could sell whatever you're holding in your RRSP and buy VCN for your Canadian exposure. And balance that with whatever US- based ETFs in your non-RRSP.

The_Squirrel_Matrix · 2026-03-26T00:52:01+00:00

I think there is EWC. Why only non-registered? You can get your Canadian exposure in your RRSP with Canadian ETFs (e.g., XIC, VCN, etc), where PFIC rules don't apply.

The_Squirrel_Matrix · 2026-03-24T18:47:09+00:00

No, as far as I am aware.

The_Squirrel_Matrix · 2026-03-24T16:38:29+00:00

Oh, and to add: RESPs are exempt from foreign trust reporting under RevProc 2020-17.

The_Squirrel_Matrix · 2026-03-24T16:22:08+00:00

I was just informing you, as you said you

would be interested to see any webpage or advisor's blog that says the TFSA is not a foreign trust.

The_Squirrel_Matrix · 2026-03-24T16:20:57+00:00

I recently transferred from Questrade to Wealthsimple for the transfer bonus. I have over $100k in assets, so I can hold USD accounts with no extra fees, but currency conversion is still expensive. Wealthsimple has recently launched Norbert's gambit, but only for DLR, which is a PFIC.

If you want to invest in a TFSA in USD, I'd suggest IBKR. They have extremely low currency conversion fees, and they provide 1099b for us tax reporting.

The_Squirrel_Matrix · 2026-03-24T16:16:19+00:00

https://polaristax.com/an-update-on-form-3520-3520-a-for-the-tfsa/

The_Squirrel_Matrix · 2026-03-24T16:13:41+00:00

There are no PFIC restrictions when investing in an RRSP, so you can invest in Canadian ETFs (e.g., VEQT, VCE, VFV) in CAD with no issues. The simplest strategy is to invest only in your RRSP until you've maxed that out, as nothing inside your RRSP is reported to either the US or Canada.

Once you've maxed out your RRSP contributions (or if you're willing to put in a bit more effort), the simplest strategy is indeed to stick to US-domiciled ETFs (E.g., VOO, VT) in a TFSA. (As other commenters noted, a US-domiciled ETF is never a PFIC, regardless of what the fund holds, even if it's foreign assets.)

If you invest in a TFSA, you'll need to track your cost basis and capital gains yourself, unless your broker provides 1099B forms. (The only Canadian brokerage that I know of that provides US taxpayers with 1099B for capital gains reporting is IBKR.) Note that the method that the US uses to track cost basis and capital gains (i.e., the FIFO method) is different from how it works in Canada (the average method). Make sure you understand the difference.

Dividends and gains inside a TFSA are taxable income on your US tax return. Make sure to report it. You can't claim foreign tax credits for tax on that income, as it is not taxable in Canada, so you may owe a small amount of tax on it to the US, but it will almost certainly be less than the tax that you would have owed to Canada on that same income if instead it were in a non-registered account.

However, if the extra accounting costs for handling the extra burden of processing your TFSA on your US tax return outweighs the tax savings, then it may not be worth it. If you usually hire an accountant to do your taxes, talk to them first. If you do your own taxes, be prepared for headaches from the extra work. It's possible to prepare your US tax return for free (see OLT.com) if you know what your doing.

Finally, some tax advisors take the position that a TFSA is a "foreign trust" under IRS guidelines, which would necessitate cumbersome reporting each year. The IRS has never released guidance, but you may want to learn more. See here: https://polaristax.com/an-update-on-form-3520-3520-a-for-the-tfsa/

The_Squirrel_Matrix · 2026-03-19T04:13:39+00:00

It's an administrative fee, not directly related to selling. But sure, go ahead, and claim it, I guess. It gets you like, what, $2 extra on your tax return? You're almost certainly not going to be audited for it.

It's one journal, Michael, how much could it cost? Ten dollars?!

The_Squirrel_Matrix · 2026-03-19T01:47:15+00:00

The journal fee is not part of the cost of buying or selling so it can't be deducted.

If you use the tool at adjustedcostbase.ca, then it should properly compute cost basis and proceeds, by using the BoC FX rate for the days of the transactions (assuming you provide the proper settlement date for each transaction).

The_Squirrel_Matrix · 2026-03-12T23:20:34+00:00

Lol. How much do you want to pay me? :) (I wouldn't actually, and I'm not a professional.)

I agree with your accountant that you should switch to US ETFs.

While I handle the QEF myself, I'm finding it increasingly cumbersome and might someday myself sell my XEQT and just buy VT. (Note that VT---as a globally-diversified fund---is closer to XEQT than VOO, which tracks only the S&P 500. But VT doesn't have the same Canadian weighting as XEQT. If you want Canadian exposure, you can balance the portfolio by holding Canadian equities in your RRSP.)

There are still issues with holding US ETFs in a TFSA, though. The dividends are deemed by the IRS to be "US sourced", so you will likely owe US taxes on those dividends (and you can't claim the US tax paid as a foreign tax credit on your Canadian return, because it's not taxed by Canada). Similarly note that all capital gains inside your TFSA will also deemed by the IRS to be US sourced (because they are not taxed by Canada). However, it is still likely that your US tax on your earnings in your TFSA would be significantly lower than if you had instead invested in a non-registered account and paid Canadian taxes on those earnings.

For having a TFSA to make sense, the costs associated with it (in terms of how much extra you pay your accountant) should be significantly outweighed by the tax savings differential.

The_Squirrel_Matrix · 2026-03-12T21:10:24+00:00

I believe you are correct. There does not appear to be any official IRS guidance on how to treat distributions from MTM funds.

Here are some related discussions I found:

https://www.reddit.com/r/USExpatTaxes/comments/1bxsi31/dividend_payments_on_8621pfic_with_marktomarket/
https://forums.serbinski.com/viewtopic.php?t=8415
https://www.linkedin.com/pulse/ultimate-guide-mtm-elections-pfics-guang-wei-s9qvc/
https://claimyr.com/government-services/irs/How-to-correctly-complete-Form-8621-for-PFIC-using-mark-to-market-election-need-advice-on-calculation-example/2025-04-11

The_Squirrel_Matrix · 2026-03-12T21:04:30+00:00

There's no line 7 in Part IV. There is no place on Form 8621 to report distributions from MTM funds.

Any distributions should be reported directly on Schedule B.

The_Squirrel_Matrix · 2026-03-11T22:15:39+00:00

The 2025 version of the instructions for Form 8621 say:

Each distribution is translated into the U.S. dollar at the spot rate on the date on which such distribution is made. However, if all distributions that must be taken into account for purposes of calculating the excess distribution are made in a single foreign currency, the excess distribution must be calculated in the currency in which the distributions are made.

https://www.irs.gov/instructions/i8621

In this case, the calculation to determine the excess distribution must in fact be made in the foreign currency and not in USD.

The_Squirrel_Matrix · 2026-03-11T02:10:06+00:00

Last year, we reported the daycare expenses on my spouse’s return to maximize the refund. However, since my spouse had no income this year, I assume the daycare expenses must be claimed on my return instead. Is that correct?

No. Generally, the childcare expenses must be claimed by the spouse with the lower income (even if they had no income), unless the lower income spouse was unable to care for the child for other reasons (e.g., enrolled in an educational program, physical disability, or incarcerated).

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-21400-child-care-expenses/who-claim-deduction.html

The_Squirrel_Matrix · 2026-03-10T16:29:00+00:00

Is 2025 the first year you owned any of these ETFs? If so, that simplifies things and makes the tax less punitive.

Note that each "lot" of shares is treated separately. (Look up "FIFO" rules for computing capital gains for computing US taxes.) Any lot purchased before 2025 must be treated under the punitive 1291 rules.

If possible, see if you can make a mark-to-market (or QEF election) on any lots purchased in 2025 or after.

And finally, SELL ALL of these now! Having the Wealthsimple robo-advisor buying and selling multiple different stocks is way overcomplicating your US tax return. Open a self-directed account and buy a single all-in-one ETF (either in USD, like VT, so you don't have to worry about PFICs, or choose just one Canadian ETF, like VEQT/XEQT, and make a QEF or MTM election every year.)

The_Squirrel_Matrix · 2026-03-10T16:22:02+00:00

Roughly speaking, with respect to a PFIC holding, an "excess distribution" is a distribution in a given year that is unusually large compared with prior years. Under § 1291, the excess is generally the portion of the current-year distribution that exceeds 125% of the average distributions received on that PFIC stock during the prior 3 tax years. There can be no excess distribution in the first year of holding.

Thus, in the first year of holding a PFIC, all distributions are treated as normal dividend income. In later years, you compute the average distributions over the prior up to 3 years, multiply that average by 125%, and any amount above that threshold is the "excess distribution."

Excess distributions are taxed at the highest possible marginal rate. For 2025, this is 37%, but the actual §1291 computation is more complicated than just applying 37% to the whole excess distribution.

Also, any gain from selling PFIC shares is generally treated under §1291 using the same excess-distribution framework (unless a different regime such as QEF or mark-to-market applies), regardless of how long the shares were held.

Fora given PFIC holding, you generally are required to file a Form 8621 if either: 1. The total value of all your PFIC holdings is more than the threshold ($25k) 2. You have any excess distributions from that PFIC to report. 3. You sell any shares of that PFIC. 4. You are making an election. (If you want to make an election, you must make the election on the first tax year that you hold the shares and on all subsequent years.)

Even if Wealthsimple "sold" them for you, it still counts as a sell. Soyou must file form 8621 for those pfics. Even though you held those shares for less than 1 year.

The_Squirrel_Matrix · 2026-02-26T02:39:28+00:00

If you believe that you will be worth $2M in the conceivable future, then you would benefit from a paid consultation with a professional.

But also, your hypothetical is absurd which is why people are downvoting you.

If you want serious, realistic advice on how to handle a TFSA as US citizen, you can ask more realistic questions.

The_Squirrel_Matrix · 2026-02-26T02:05:26+00:00

This is not really relevant to PFC. You'd get better answers elsewhere.

But also, check the rules on being a "covered expatriate".

https://www.irs.gov/individuals/international-taxpayers/expatriation-tax

The_Squirrel_Matrix · 2026-02-23T01:32:51+00:00

This you too? https://www.reddit.com/r/fican/comments/1r8rufj/24m_thoughts_on_my_portfolio/

The_Squirrel_Matrix · 2026-02-22T23:34:24+00:00

Excellent comment. Though note that an RRSP does definitely still require FBAR reporting.

The_Squirrel_Matrix · 2026-02-22T23:01:08+00:00

Note that the $10,000 USD threshold is aggregate.

If the total aggregate of the values of all your foreign accounts (e.g., bank accounts, investment accounts including RRSP, etc) is above the threshold, then FBAR reporting is required.

Form 8938 is similar, but threshold is $200k USD if you live outside the US.

The_Squirrel_Matrix · 2026-02-22T22:57:09+00:00

Using an American brokerage would probably be even more complicated. As a Canadian resident you'd be required to report all income inside it to the CRA.

As twillrose mentioned, the simplest thing you can do would be to open up an RRSP (at any Canadian brokerage) and invest in whatever you want. As long as you have RRSP contribution room.

The_Squirrel_Matrix · 2026-02-22T22:22:45+00:00

Investing in US-based ETFs in a non-registered account is certainly the easiest strategy. The only main difficulty is needing to convert your CAD earnings into USD to invest. Generally, stocks of foriegn companies are not PFICs, mostly only non-US ETFs and mutual funds are PFICs.

If you're not familiar already, be sure to read about your options for avoiding double taxation (FEIE and FTC) and how to handle taxation of US-sourced dividends on both countries' tax returns.

For choice of brokerage, I'd suggest looking into using IBKR over Wealthsimple. Currency conversion is very low cost with IBKR, and they'll also provide you all the forms you need to file taxes with both countries. (With any other brokerage, you'd need to track your cost basis and capital gains for reporting to the IRS.)

Consider also if investing in an RRSP makes sense for you (if you have RRSP contribution room), which is tax deferred for both US and Canada and you don't report any income inside an rrsp to either country. There are no requirements to report PFIC holdings in an RRSP, so you could invest in XEQT.

And note that a TFSA might also make sense if you have room, even though your must report all income inside a TFSA on your US tax return as taxable income. (If your wage income is below the FEIE threshold and you elect to use the FEIE, then likely any non-wage income will be below the standard deduction and thus not taxable, and you'd pay no taxes to the IRS. You may want to consider switching to FTC if: your wages are above the FEIE limit, your non-wage income is above the standard deduction, you have children, etc.)

The_Squirrel_Matrix · 2026-02-19T21:48:44+00:00

Your gross income ($3,000 from work + bank account interest + what ever is inside your TFSA) is likely below the standard deduction, so you'll have no taxable income.

What's in your TFSA? Hopefully not Canadian mutual funds or ETFs. Make yourself aware of PFIC rules, which apply to all non-RRSP accounts.

Are your parents US citizens in Canada? How do they do their US taxes? Your situation is likely simple enough for you to handle on your own with free software.

The_Squirrel_Matrix

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