Updated Checked by the Tax-Services.ca editorial team How we check
US withholding tax on Canadians starts at 30% on most US-source income, but the Canada-US treaty cuts the rate on US dividends to 15% once your broker has a valid Form W-8BEN on file. So $1,000 of dividends leaves you with $850 instead of $700, and you can usually claim the 15% back as a credit on your Canadian return.
Who takes 30% and who takes 15%?
The IRS applies a 30% rate to most US-source income paid to nonresident aliens, which is what you are as a Canadian resident. The list includes dividends, royalties and pensions. A tax treaty can lower the rate, and you claim that on Form W-8BEN, which you hand to whoever pays you.
Timing matters. The IRS says to give the form before the income is paid. If you don’t, the payer can withhold 30%.
| Type of US-source income | Rate under the treaty |
|---|---|
| Dividends, general case | 15% |
| Dividends to a company owning at least 10% of the voting stock | 5% |
| Royalties, standard case | Up to 10% |
| Some copyright, software, patent and know-how payments | Taxed only in the recipient’s country |
| Periodic pension payments | Up to 15% |
| Dividends inside an RRSP or similar plan | Exempt |
| No valid form on file | 30% default |
We haven’t listed interest. The treaty text we could read gives 10%, but later changes exist and we couldn’t confirm the current figure on an official page. Look it up before you plan around it.
How big is the difference in dollars?
Picture Dana in Winnipeg, who owns US stocks in a regular account that pay $5,000 in dividends over the year. With the form on file, the payer holds back 15%, which is $750. Without it, the default 30% takes $1,500. Same shares, same dividends, and a $750 difference just because a form was missing.
That’s why the paperwork is the first thing to check when you open an account that can hold US stocks. A few minutes at the start saves a real chunk of money later.
How does the W-8BEN work?
It’s a short form that says you’re a foreign individual and which country you live in. Line 9 is where you claim treaty benefits. A form stays valid from the day you sign until the end of the third calendar year after that, unless something on it changes, like your address or residency.
Some cases need a US taxpayer number or a foreign tax ID on the form, and the IRS instructions say which. Read them before you fill it in, and hand it only to the payer or your broker. Most Canadian brokers collect it through your online account when you first buy a US security, so you may have already signed one without noticing.
Do you get the withholding back in Canada?
Usually you get a credit, not a refund. The CRA lets you claim a foreign tax credit on Form T2209, and the result goes on line 40500 of your return. The CRA’s page on the federal foreign tax credit says that in most cases, for each foreign country, you claim whichever amount is less: the foreign tax you paid, or the Canadian tax on the income from that country. Convert US amounts to Canadian dollars using Bank of Canada rates, the rate for the day the amount arose, or the average annual rate if you got several payments.
Here’s a worked example. You’re in Ontario with $80,000 of work income and you get $1,000 of US dividends in a taxable account. Assume the dividends are taxed like ordinary income. The marginal tax rate calculator shows 29.6% on that kind of income at that pay level, so about $296 of Canadian tax.
US withholding at the treaty rate took $150. The credit covers all $150, since it’s under the $296 cap. Canada collects the remaining $146. The total is still about $296, so the 15% isn’t an extra cost, it’s part of the same bill.
Compare that with $1,000 of Canadian eligible dividends. The same calculator shows a 6.4% marginal rate on those at this income, about $64. That gap is why people keep asking where to hold US stocks.
Does an RRSP get a break?
Yes. The treaty exempts RRSP-type plans from US tax on investment income, so US dividends inside one arrive with nothing withheld. Try the RRSP calculator to see what a contribution does to your tax.
What about the TFSA? We couldn’t confirm how the treaty treats it, so we won’t say. Check the IRS treaty text or ask your broker before you assume anything. The TFSA calculator covers the Canadian side only.
What if 30% was taken by mistake?
It happens, usually because a form lapsed or never reached the payer. First, get a valid W-8BEN on file so it stops. Then ask your broker whether they can correct what was already held. Getting money back from the IRS is a separate process that we haven’t confirmed, so ask your broker or read the IRS instructions before you count on it.
Whatever was withheld still counts towards your Canadian foreign tax credit, within the cap described above. Keep the year-end slips from your broker, because you’ll need them at tax time.
Mistakes and limits
The worked example uses one taxpayer and a simple rate. Your own bracket, other income and provincial tax will change the Canadian figure, so run the income tax calculator with your real numbers. The credit is capped by the Canadian tax on that income, so it may fall short of the withholding when your other income is low.
Another slip is letting the form lapse. The IRS says a missing form can mean 30% withholding, so renew before the third year runs out.
Lastly, this page covers a Canadian resident receiving US income. If you’re a non-resident being paid from Canada, the rules run the other way.
How we checked the figures
The 30% rate and the form rules come from the IRS. The dividend, royalty and pension rates and the RRSP exemption come from the Canada-US tax convention as published by Finance Canada. The foreign tax credit rules come from the Canada Revenue Agency. We read all of them in September 2026, and the dollar figures come from the calculator on this site. The $5,000 example is our own multiplication.
Frequently asked questions
What is the US withholding tax rate for Canadian residents?
The default is 30% on most US-source income. The Canada-US treaty lowers it, for example to 15% on most dividends.
Do I need a W-8BEN?
You need one on file with your payer to get the treaty rate. Without it the payer can withhold 30%.
How long does a W-8BEN last?
From the date you sign until the end of the third calendar year after that, unless your details change.
Can I recover the US tax on my Canadian return?
Usually as a foreign tax credit on Form T2209, limited to the lesser of the foreign tax paid and the Canadian tax on that income.
Is there US withholding on US dividends inside an RRSP?
The treaty exempts RRSP-type plans from US tax on investment income, so there's normally none.