Which account for which investment (asset location)

Topic: Investing Deep Dive · Part 4 of 8 · ⚫ Expert

In one sentence

Asset location means choosing which account (TFSA, RRSP, FHSA or a regular taxable account) holds which investment, so you lose less to tax.

Words to know

Registered account: an account with special tax rules from the government, like a TFSA, RRSP or FHSA.
Non-registered account: a regular investment account. You pay tax on its income and gains each year.
Withholding tax: tax taken from a payment before you get it. The U.S. withholds tax on U.S. dividends paid to Canadians.
Capital gain: the profit when you sell an investment for more than it cost you.

Step 1: Know how each account is taxed

TFSA: contributions are not deductible. Interest, dividends and capital gains inside are generally tax-free, even when you withdraw.
RRSP: contributions are deductible. Growth is not taxed while it stays inside. You generally pay tax when you withdraw.
FHSA: contributions are generally deductible. A qualifying withdrawal to buy your first home is tax-free. A non-qualifying withdrawal is taxable income.
Non-registered: you pay tax each year on interest and dividends, and on capital gains when you sell.

Step 2: Know how each type of income is taxed (non-registered)

Interest (from bonds, GICs, savings): fully taxed, like your pay.
Eligible Canadian dividends: grossed up to 138% of the amount, then you get a dividend tax credit. This usually means less tax than interest. Part 6 explains it.
Capital gains: only half of the gain is added to your income. Part 5 explains it.
Foreign dividends (for example from U.S. stocks): fully taxed, and they do not get the dividend tax credit. You can usually claim a foreign tax credit for tax already withheld abroad.

Step 3: Understand the 15% U.S. withholding tax

When a U.S. company or U.S.-listed ETF pays a dividend to a Canadian, the U.S. usually keeps 15%. This is the treaty rate in the Canada–U.S. tax treaty.

The treaty also says dividends received by an arrangement that exists only to provide pension or retirement benefits are exempt. An RRSP (and a RRIF) is treated this way. So U.S.-listed ETFs held directly in an RRSP usually have no U.S. withholding tax. Your broker normally needs a form called a W-8BEN on file.

A TFSA is not treated as a retirement account for this rule. So the 15% is usually withheld in a TFSA, and you cannot get it back. For an FHSA, check with your broker, and assume the 15% may apply.

One more detail: a Canadian-listed ETF that holds U.S. stocks pays the U.S. tax inside the fund. Holding it in an RRSP does not remove that tax.

Step 4: Use the general patterns, then keep it simple

These are common patterns, not rules. The right answer depends on your accounts, income and goals.

Account	Tax on growth inside	U.S. dividends from a U.S.-listed ETF	Often used for
TFSA	Generally none, even on withdrawal	15% usually withheld, not recoverable	Investments with the most expected growth; flexible money
RRSP	None until withdrawal; withdrawals taxed	Usually exempt (treaty), with W-8BEN	U.S.-listed ETFs; bonds and interest
FHSA	None if the withdrawal qualifies for a first home	Check with your broker	Saving for a first home, matched to your timeline
Non-registered	Taxed each year (interest, dividends) and on sale (gains)	15% withheld; foreign tax credit usually available	Canadian stocks; investments that grow mostly through gains

Checked October 2026 on canada.ca and the Canada–U.S. tax treaty.

Asset location is fine-tuning. Many people simply hold the same asset allocation ETF in every account. That is simple and still a sound plan.

Example

A U.S.-listed ETF pays you US$1,000 in dividends in one year.

In a TFSA: 15% × $1,000 = $150 is withheld. You receive $850. The $150 is gone.
In an RRSP (with a W-8BEN): usually $0 withheld. You receive $1,000 inside the RRSP.
In a non-registered account: $150 is withheld and you receive $850. You report the full $1,000 (in Canadian dollars) as income. You can usually claim a foreign tax credit for the $150.

Now compare $1,000 of each income type in a non-registered account. Interest: $1,000 is added to income. Eligible Canadian dividends: $1,000 × 138% = $1,380 is added, but you get a federal dividend tax credit. Capital gain: $1,000 × ½ = $500 is added.

Common mistakes

Thinking the TFSA avoids every tax. It does not avoid U.S. withholding tax.
Holding a Canadian-listed U.S. ETF in an RRSP and expecting no withholding tax.
Letting asset location upset your overall mix. Your stocks/bonds target comes first.
Forgetting the W-8BEN form, or not checking that your broker has it.

✅ My checklist

☐ I know how my TFSA, RRSP, FHSA and non-registered accounts are taxed.
☐ I know interest, dividends and capital gains are taxed differently.
☐ I know U.S. dividends lose 15% in a TFSA but usually not in an RRSP.
☐ I checked that my broker has a W-8BEN on file if I hold U.S. investments.
☐ My overall stocks/bonds mix is still on target across all accounts.

Next in this topic → Part 5: Investment taxes: capital gains, ACB and tax-loss selling

Back to the topic → Investing Deep Dive

There are no affiliate or referral links in this post. This is general information, not financial, tax or legal advice; everyone’s situation is different. Figures were checked in October 2026 and can change.

Sources: CRA: What is a TFSA · CRA: RRSP making withdrawals · CRA: First Home Savings Account · CRA: Withdrawals and transfers out of your FHSAs · Finance Canada: Canada–US Tax Convention (consolidated) · Questrade: RRSP foreign withholding tax · CRA: Line 12100 Interest and other investment income · CRA: Lines 12000 and 12010 Taxable amount of dividends · CRA: Guide T4037 Capital Gains