best way to convert USD to CAD

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

best way to convert USD to CAD

Post by jixca »

Single US resident in NY here (Canadian on TN), non resident of Canada.

Due to uncertainty of future, I realize a significant amount of my wealth (savings and investments) are denominated in USD. While it's pretty strong right now I'd like to start converting some to CAD while they're high before it's too late, plus saving rates are higher in Canada. I can move the USD from US to Canada, but the conversion within the Canadian bank itself is horrible.

Without opening a non sheltered brokerage account in Canada (so no norbert gambit), what is the best way of converting USD to CAD (10k to 100k this year) that's does not have any tax consequences?

Transferwise looks ok, but still charges $500 to $600 for 100k, is there any way to lower it?
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: best way to convert USD to CAD

Post by jixca »

I found out that the direct conversion rate at TD Waterhouse is ok, a little worse than transferwise but a lot better than TDCT.

Is there any CRA/IRS tax consequence if I were to transfer USD from my Canadian bank to a family member (non US person) who can perform USD->CAD conversion at TD Waterhouse investment brokerage account, then transfer CAD back to me?

The exchange of currency only happens once so I don't think there's any impact in terms of gains. The only thing I can think of is gift tax on IRS side but I''m getting the full amount back so not sure how that works.
pl0910001
Posts: 23
Joined: Fri Jun 21, 2019 6:33 pm

Re: best way to convert USD to CAD

Post by pl0910001 »

I've used Knightsbridge in the past. The rate is not bad but requires a canadian bank account in usd. The best option is Norbert's Gambit.
Go to the Canadian Portfolio Manager website (for great Canadian Couch Potato investment details too) and they spell it all out. A bit of work but certainly the best rate you can get. Good Luck
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: best way to convert USD to CAD

Post by jixca »

Thanks I'm aware of Norbert's Gambit but that requires investment brokerage account inside Canada. As non resident I can't open one and it'll also add to IRS tax reporting hassle with the transaction.

I already have both USD and CAD account with TDCT and can do the conversion online, but their rate is terrible.
Bumble
Posts: 16
Joined: Tue Apr 23, 2019 1:07 am

Re: best way to convert USD to CAD

Post by Bumble »

Using Interactive Direct may be a cheap option. I haven't opened an account yet, so don't have first-hand experience.

See:
http://blog.plsoucy.com/2012/11/best-wa ... e-on-fees/
http://blog.plsoucy.com/2013/03/convert ... ers-howto/

Cheers,
Bumble
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: best way to convert USD to CAD

Post by jixca »

Thanks all but I want to avoid opening an investment brokerage account. US resident here so it is a hassle on IRS reporting next year.

Question, suppose I find someone in Canada who wants to do exchange with me (I buy CAD with my USD, at a rate we both agree), and this all gets done through bank transfer into each other's account, what is the IRS reporting requirement, if any? I think that's the closet to market rate option.
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: best way to convert USD to CAD

Post by jixca »

Actually the interactive broker may be possible but with an account based in US instead, the only thing is I won't have an easy way to get the CAD from US to Canada after buying them.
Fug1
Posts: 57
Joined: Sun Mar 09, 2014 12:00 pm

Re: best way to convert USD to CAD

Post by Fug1 »

I used Interactive Brokers. As a US resident, you'll need to open a US Interactive Brokers account (interactivebrokers.com). There is a monthly account maintenance fee, but it's waived if you hold $100k in the account (and I think there's also a trial period where the waive the fee).

I think it's (slightly) cheaper than Norbit's Gambit, but the biggest advantage is that the conversion settles instantly. To execute the conversion, you "sell" a security called USD.CAD on the Interactive Brokers platform. Both CAD and USD can be held in the same account.

To move the money to Canada after you convert, you can just execute an international wire. That's what I did to move money for my home purchase in Canada. There is no cost to transfer money out from Interactive Brokers, but the receiving bank in Canada will probably charge you to receive the wire.
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: best way to convert USD to CAD

Post by jixca »

Interesting, thanks for the idea. I didn't know I could wire CAD from a US based brokerage to Canada.

I'll look into it. I already have TD Ameritrade so I'll check with them first if I can do it similarly.
tchains
Posts: 14
Joined: Mon May 07, 2018 4:58 pm

Re: best way to convert USD to CAD

Post by tchains »

look into Remitr for low cost wire options
NewCanadian
Posts: 75
Joined: Sun Mar 07, 2010 5:07 pm

Re: best way to convert USD to CAD

Post by NewCanadian »

Schwab does it USD to CAD conversion for market rate as per XE.com at about 1% commission. Very competitive rates.
Post Reply