To buy Canadian stocks in the US, you have three routes: American Depositary Receipts listed on the NYSE or NASDAQ, foreign ordinary shares that trade on the OTC market, or direct purchases on the Toronto Stock Exchange through a U.S. broker that supports international trading. Each route carries different costs and paperwork, and the account you hold the stock in matters as much as the route itself, because Canada withholds tax on every dividend and only some account types let you get it back.
The Three Routes Into Canadian Stocks
American Depositary Receipts
ADRs are the simplest option. A U.S. depositary bank holds the underlying Canadian shares and issues receipts that trade on U.S. exchanges in U.S. dollars under standard settlement rules.1U.S. Securities and Exchange Commission. American Depositary Receipts (ADRs) Toronto-Dominion Bank, Barrick Gold, Canadian Natural Resources, and Brookfield Asset Management all have ADR listings. You buy and sell them like any domestic stock.
The cost that doesn’t show up on your trade confirmation is the depositary bank’s pass-through fee, charged quarterly or annually for custody, dividend processing, and corporate actions. These fees run about one to three cents per share and come out of your account automatically.2Charles Schwab International. Learn About ADRs and International Stock Types On a low-priced share, the drag is real; on a $100 stock, it barely registers.
OTC Foreign Ordinary Shares
Canadian companies without a full U.S. exchange listing often trade on the OTC market under five-letter tickers ending in F.3OTC Markets Group. FAQ on Ordinary Shares These are the actual foreign shares, so there are no depositary custody fees, but spreads run wider and volume is thinner than on ADRs.
One caution: if a company stops making its financials publicly available, its OTC shares move to the Expert Market, which retail investors cannot trade. Only broker-dealers and institutions have access.4OTC Markets. 15c2-11 Resource Center If you already hold shares when that migration happens, selling gets much harder. Sticking to companies on OTCQX or OTCQB avoids the trap.
Direct Trading on the Toronto Stock Exchange
Going directly to the TSX or TSX Venture Exchange opens up the full universe of Canadian-listed companies, not just the ones that bothered to set up U.S. market access.5TMX Group. Market Access Smaller mining companies, cannabis names, and other Canadian-only equities live here. Trades execute in Canadian dollars, so currency conversion enters every buy and sell.
Not every U.S. broker supports direct TSX trading. Interactive Brokers, Schwab, and Fidelity do. Before you place an order, confirm your broker connects to both the senior TSX board and the TSX Venture Exchange, because smaller listings sit on the Venture Exchange and some brokers reach only the main board.
Turning On International Trading
Even at brokers that support Canadian markets, international trading is off by default. You have to request the permission, which means filling out disclosures about your experience with foreign equities and your understanding of currency risk. It’s usually a few minutes online. Once approved, foreign ticker symbols become available in your order entry system.
What Canadian Trades Actually Cost
The zero-commission model that covers U.S. stocks doesn’t extend to Canadian trades. Schwab charges $6.95 per online trade for Canadian securities on local exchanges, plus a $25 service charge for broker-assisted orders.6Charles Schwab. Pricing – Account Fees Other brokers use comparable fixed or per-share pricing.
The bigger cost is currency conversion. When you buy a stock priced in Canadian dollars from a U.S. dollar account, the broker converts at the spot rate plus a markup. Fidelity’s markup is 1.0% on transactions under $100,000, dropping to 0.50% between $250,000 and $500,000, and 0.20% or less above $1 million.7Fidelity. Brokerage Commission and Fee Schedule On a $10,000 purchase, that’s $100 in hidden fees going in, and another $100 coming out when you sell. A round trip starts you 2% behind before the stock has moved.
Some brokers, Interactive Brokers among them, let you hold a Canadian dollar balance. If you plan to trade Canadian stocks regularly, converting a lump sum once and keeping the proceeds in CAD avoids paying the spread on every transaction. Worth asking about.
Canadian Dividend Withholding
Canada imposes a 25% withholding tax on dividends paid to non-residents under Part XIII of the Income Tax Act.8Government of Canada. Non-Resident Tax Withholding, Remitting, and Reporting The U.S.-Canada tax treaty reduces that to 15% for most individual U.S. investors who are the beneficial owners of the dividends.9Government of Canada. Convention Between Canada and the United States of America With Respect to Taxes on Income and on Capital
To get the 15% rate rather than 25%, your broker needs to know you’re a U.S. person. That’s what Form W-9 does: it certifies your U.S. taxpayer status, which the broker uses to claim the treaty rate on your behalf.10Internal Revenue Service. Instructions for the Requester of Form W-9 Most brokers collect a W-9 when you open the account. If you’re not sure yours is on file, confirm.
Getting the Withholding Back Through the Foreign Tax Credit
The 15% Canadian withholding isn’t lost money in a taxable account. The foreign tax credit offsets your U.S. tax bill by what you’ve already paid Canada, so the same dividend doesn’t get taxed twice.
If your total creditable foreign taxes for the year come to $300 or less ($600 if married filing jointly), and all your foreign income is passive income reported on Forms 1099, you can claim the credit directly on Schedule 3 of your Form 1040 with no additional paperwork.11Internal Revenue Service. Instructions for Form 1116 (2025) Most casual investors holding a few Canadian dividend stocks land under this threshold.
Above $300, you’ll file Form 1116, which calculates the credit based on your foreign source income relative to total income.12Internal Revenue Service. Foreign Tax Credit The math is straightforward for ordinary dividend income. Hold onto your brokerage statements showing Canadian tax withheld; your broker should also report those amounts on your year-end 1099-DIV.
Why Retirement Accounts Are the Wrong Home
This is where investors lose money without realizing it. If you hold Canadian dividend stocks in a traditional IRA, Roth IRA, or 401(k), Canada still withholds 15% on the dividends. But those accounts don’t produce currently taxable income on your U.S. return, so you have no U.S. tax liability to credit the foreign tax against. The 15% is a permanent loss.
In a taxable account, that same 15% gets recaptured through the foreign tax credit. In a retirement account, it’s gone. On a stock yielding 4%, roughly 0.6% of your position evaporates every year for nothing. Over 20 years, the compounding cost adds up.
The practical rule: hold Canadian dividend-paying stocks in a taxable account where the credit works, and reserve tax-advantaged accounts for U.S. stocks or Canadian growth stocks that don’t pay dividends. Roth IRAs are a particularly poor fit, because the treaty doesn’t automatically treat them as exempt pension arrangements for withholding purposes.
Avoid Canadian-Listed ETFs and Mutual Funds
If you’re thinking of a Canadian-listed ETF or mutual fund as a shortcut to diversified exposure, don’t. The IRS classifies most Canadian-domiciled funds as Passive Foreign Investment Companies, which triggers one of the harshest tax regimes in the Internal Revenue Code.
A foreign corporation is a PFIC if 75% or more of its gross income is passive, or if at least 50% of its assets produce passive income.13Internal Revenue Service. Instructions for Form 8621 Canadian ETFs and mutual funds almost always meet one of those tests. Under the default treatment, you lose the preferential rates on qualified dividends and long-term capital gains, gains are taxed at the highest marginal rate, and an interest charge is added as if the income had been earned ratably over your holding period.
You also have to file Form 8621 for each PFIC you own. A limited exemption exists if the total value of your PFIC holdings is $25,000 or less ($50,000 on a joint return) on the last day of the tax year and you receive no excess distribution and sell no shares.13Internal Revenue Service. Instructions for Form 8621 That exemption covers only the annual reporting; the punitive tax treatment still hits when you sell.
The workaround is easy. Buy a U.S.-domiciled ETF that invests in Canadian stocks. A U.S.-listed Canada ETF is a domestic fund, not a PFIC, and gives you essentially the same exposure without the tax problem.
FBAR and FATCA Do Not Apply to U.S. Brokerage Accounts
Buying Canadian stocks through a U.S. broker such as Schwab, Fidelity, or Interactive Brokers does not trigger foreign account reporting. Your brokerage account is a domestic account regardless of what sits inside it. FBAR and FATCA obligations only arise if you open an account directly with a Canadian financial institution.
If you do open a Canadian brokerage or bank account, FinCEN Form 114 (the FBAR) is required when the aggregate value of all your foreign financial accounts exceeds $10,000 at any point during the calendar year.14Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) Separately, FATCA requires Form 8938 when specified foreign financial assets exceed $50,000 on the last day of the tax year or $75,000 at any point during the year, with the thresholds doubled for joint filers.15Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets The FBAR goes to FinCEN; Form 8938 goes to the IRS with your tax return. They overlap but are separate filings with separate penalties. For most U.S. investors buying Canadian stocks through a domestic broker, neither one is in play.