Q&A: Winters in Florida
Question: I go to Florida for the winter and need U.S. dollars for expenses. If
I buy U.S. interest income securities through a Canadian broker to finance all
or part of my stay, how is the income taxed in Canada and in the U.S.? Can tax-free
U.S. bonds be used by a Canadian? How does it affect the 8840 Closer Connection
form I file each year? – B.B.
Gordon Pape answers: You’re making this overly complicated.
Any Canadian resident can invest in U.S. dollar securities; in fact you can
buy U.S. dollar GICs or term deposits at your local bank. You declare the interest
on your Canadian tax return just like any other interest income, except you
must convert to Canadian dollars using the CRA’s official exchange rate
for that year. The income does not have to be reported in the U.S., assuming
you are not a resident or citizen of that country.
There is no point in buying U.S. tax-free municipal bonds, since the tax break
only applies to Americans. Canadians have to declare the interest on their returns
and pay tax at the usual rate.