Canadians who invest in U.S. companies and rely on those dividends for income may soon face a big tax hike.
U.S. President Donald Trump has dubbed it his “big, beautiful bill,” but it’s left Canadian investors like Derek McGregor feeling deflated.
“I would be losing close to six figures every single year if this new bill gets implemented” said McGregor, who adds that it “would obviously drastically change my lifestyle, my kids’ lifestyle, my family’s lifestyle.”
In section 899 of Trump’s 1,000-page bill, you’ll find a section titled, “remedies against unfair foreign taxes” that according to multiple investment and tax experts would open the door for individual Canadians to be hit with a higher tax on the dividends they receive from US based investments.
“It’s possible that everyone, in some capacity, who is a retail investor should be concerned” said Ali Spinner, a tax partner at Crowe Soberman LLP.
Currently, individual Canadians incur a 15 per cent withholding tax on U.S. dividend income, unless the payment is going into a retirement account like an RRSP. The proposed tax bill would see that tax rate increase five per cent a year until it hits 50 per cent.
Speaking to CTV National News, McGregor admits that “in the investment portfolio I currently have, 98 per cent is invested in U.S. entities”
If this new tax is passed by the United States senate, McGregor adds that “it would make it nearly impossible to live the same lifestyle we’re living now.”
The Trump administration’s “big, beautiful bill” narrowly passed the Republican-led U.S. House last month.
If it makes its way through the U.S. Senate, even Canadian pension funds like the Canada Pension Plan (CPP) could be impacted. Tax experts are preaching patience, saying the bill in its current form, could still undergo changes.
“Pay attention, but don’t panic,” Spinner advises, going on to share that if you’re concerned, “speak to your advisors to understand how this could impact you. There are likely to be changes along the way from what we’re seeing now in proposals versus when this legislation passes, if it goes through.”
The U.S. government says this section of their bill is in retaliation for unfair taxes from certain countries. Experts think it will apply to Canada, partly due to a recently implemented digital service tax that charges companies like Facebook three per cent annually.
Trump has said he would like the bill to pass through the U.S. Senate by July 4, though it’s expected to face some stiff opposition. If passed, the increased tax for Canadian investors could begin as early as Jan. 1, 2026.
