Wealthsimple Trade offers both TFSA (Tax-Free Savings Account) and a Personal account. Individual stocks and ETFs (Exchange Traded Funds) can be held on both accounts.
Profit from stocks inside a Wealthsimple TFSA (Tax-Free Savings Account) account is tax-free while profits on a Wealthsimple Personal account are taxable. Also, a Personal account has no limit on the amount of deposits or withdrawals whereas TFSA has a deposit limit.
At the same time, losses inside a TFSA account are not tax deductible. Losses on a Personal account may be eligible for a tax deduction.
Wealthsimple Trade Personal vs TFSA (Main Differences)
| Wealthsimple Personal | Wealthsimple TFSA |
| Gains from stock investments are taxable income | Gains from stock investments are tax-free |
| Losses can be tax deductible | Losses are not tax deductible |
| No limit on the amount of deposits | Deposits are limited up to your TFSA Contribution Limit |
| Day trading is allowed (no limit on the number of stock trades) | Day trading can be penalized |
| Cash withdrawals are allowed anytime | Cash withdrawals are allowed anytime |
Overall, Wealthsimple Personal is best for short-term trading, especially when you are planning to hold stocks for just a couple of hours or days. On the other hand, Wealthsimple TFSA is best for medium to long-term savings.
TFSA has a contribution limit of around $6,000 per year. Once your TFSA deposits exceed your TFSA limit, Wealthsimple Personal is also a viable option.
Wealthsimple Personal Account
A Wealthsimple Personal account is simply a Wealthsimple Trade’s cash or a non-registered account. Wealthsimple personal accounts have no limit on the number of stock trades, deposits, and withdrawals. However, profits from a Personal account are taxable income.
Dividends from stocks or ETFs are also taxable inside a Personal account.
Wealthsimple Promotion: Get $50 cash bonus when opening a Wealthsimple Trade TFSA or Non-Registered Account. Cash will be added after funding $500 or more in the first 30 days of account opening. Visit wealthsimple.com to open an account.
Day Trading on a Wealthsimple Personal Account
Day trading is allowed on a Wealthsimple Personal Account. Wealthsimple Personal has no restrictions on the number of stock trades. However, Wealthsimple Trade charges a 1.50% ($1.50 for every $100 US trade) conversion fee for US stock trades.
Wealthsimple Trade may be best for Canadian stock trades as they are commission free.
Related: How to Start Investing in Stocks in Canada (with $100 or less)
Taxes on a Wealthsimple Personal Account
Investment gains from stocks on a Wealthsimple Trade Personal account have to be declared as taxable income during tax season. Profits on a Wealthsimple Personal account are generally taxable as capital gains or business income. Profits are taxable when gains are realized (when a stock is sold).
Losses are deducted against your gains for tax purposes. For example, you can hold stocks for years without taxes. Taxes will apply on the tax year the stocks are sold (realized gains).
Also, dividends are taxable on the year they are received.
Wealthsimple Trade
- No minimum requirement. Anyone can start with $150 or less.
- $0 commission fees on stock trades
- Invest in Stocks & ETFs listed on stock exchanges in the United States and Canada
- 1.50% exchange rate fee for US dollar trades
- Fractional Trading
- More than 2 Million People have a Wealthsimple account
Wealthsimple Promotion: Get $50 cash bonus when opening a Wealthsimple Trade TFSA or Non-Registered Account. Cash will be added after funding $500 or more in the first 30 days of account opening. Visit wealthsimple.com to open an account.
Wealthsimple Trade Tutorial – How to Buy and Sell Stocks (US and CAD stock)
Wealthsimple Youtube Video Tutorial: How to Trade Fractional Shares on Wealthsimple Trade
Business Income (Day Trading) vs Capital Gains
Business income is taxable similarly to employment income, where the earnings fully count towards taxable income. On the other hand, just half (50%) of capital gains count as taxable income.
While there is no fixed number of trades that constitutes day trading in Canada, CRA considers these factors to determine whether profits on stock trades are taxable as business income or capital gains.
- Number of Trades
- How long a stock or an asset is held before selling
- How substantial is the trading income compared to the total income
- Time spent on trading
More than 20 trades a week, holding stocks for just a couple of hours at a time, and 80% of the total taxable income that comes from trading will likely be taxable as business income.
On the other hand, trading many times once in a while to change investments, but generally holds stocks for several months to a year, and income from trading just makes up less than 10% of total taxable income (employment income, etc.), may likely be taxable as capital gains.
Classifying trading income between capital gains and business income could be a bit confusing in some cases, and an accountant could help. CRA audits tax filings to check whether taxes are filed correctly.
Wealthsimple Personal Taxes: Business Income vs Capital Gains
| Business Income (ex. Day Trading) | Capital Gains | |
| Net Stocks Gains (Gains – Losses on a year) | $5,000 | $5,000 |
| Taxable Income | $5,000 | $2,500 (50% are taxable for capital gains) |
| Tax rate (example)* | 30% | 30% |
| Taxes | $1,500 | $750 |
*Tax rate is only an example. Your tax rate may differ. Combined provincial and federal marginal tax rates in Canada typically range from 20% to 55%.
Wealthsimple TFSA (Tax-Free Savings Account)
Investment gains on a Wealthsimple TFSA are tax-free. Withdrawals from a Wealthsimple TFSA are tax-free. However, the total deposits to all your TFSA accounts such as Wealthsimple TFSA are limited up to your TFSA contribution limit.
- Any profit from stocks (dividends or capital gains) on a TFSA is tax-free.
- Deposits to TFSA accounts are limited up to your TFSA contribution limit.
- Deposits above the contribution limit are subject to a 1% monthly tax by the CRA. (Example: TFSA over-contribution of $5,000 = $50 monthly penalty until withdrawn)
- Day trading on TFSA is not recommended and can be penalized by the CRA. TFSA is designed for medium to long-term savings.
- Deposits and withdrawals are tax-free. TFSA withdrawals have no limit.
- Gains or losses will not impact the amount of the TFSA contribution limit.
US Stocks in a TFSA
US stocks can be invested in TFSA accounts. Most TFSA self-directed accounts offer stocks in the United States (US) and Canada. International stocks are also allowed on a TFSA, but international trades on brokerages may have a high commission fee.
Also, US stock dividends on a TFSA are generally subject to withholding taxes of about 15%.
TFSA Contribution Limit
- Unused contribution limits from past years do not expire
- Withdrawals are added back to the contribution limit next year
- Multiple TFSA accounts can be opened, but the total deposits should be below the contribution limit
- The value of investments on TFSA does not affect the contribution limit
TFSA Contribution Limit
| Year | Contribution Limit |
| 2022 | $6,000 |
| 2021 | $6,000 |
| 2020 | $6,000 |
| 2019 | $6,000 |
| 2018 | $5,500 |
| 2017 | $5,500 |
| … | … |
| 2009 | $5,000 |
Is Wealthsimple free?
Stock and ETFs in Canada trades, deposits, and withdrawals are commission free on Wealthsimple Trade. However, Wealthsimple charges a 1.5% exchange rate fee to trade US stocks ($1.50 fee per $100 trade). Trades of less than $500 of US stocks are still cheaper with Wealthsimple Trade compared to around $9.95 USD on the big banks.
Can I buy individual stocks on Wealthsimple?
Individual stocks on stock exchanges in US and Canada can be traded with the Wealthsimple Trade platform. On the contrary, Wealthsimple Invest automatically invests funds in different assets in exchange for a management fee of around 0.5% per annum.
Wealthsimple has no minimum balance required for all kinds of accounts.
Is TFSA better than a personal account?
TFSA is better than a personal account since investment profits are tax-free on TFSA. On the other hand, a personal account is better for day trading and swing trading since there is no limit on the number of trades, deposits, and withdrawals.
What if I make a lot of money in a TFSA?
If you make a lot of money in a TFSA, the contribution limit will not be affected. As long as gains in a TFSA are not considered business income (such as day trading), gains are tax-free.
Does Wealthsimple allow short selling?
Wealthsimple Trade does not currently offer short-selling stocks. Moreover, short selling through put options is not available with Wealthsimple. With that said, short selling through inverse ETFs can be done on Wealthsimple Trade. Inverse ETFs work to short-sell major indexes like the S&P 500.
An inverse ETF appreciates in value when a stock or index depreciates. As such, an inverse ETF depreciates in value when a stock or index appreciates.
How to Short the Market using Wealthsimple