Taxes for U.S. Owners of Canadian Property (2024)

FAQs

What are the tax implications for Canadians owning U.S. property? ›

For Canadians owning U.S. real estate, rental income from such U.S. property will generally be treated as gross rental income in the U.S. and would be subject to a 30% U.S. withholding tax. However, for Canadian tax purposes it is the net rental income that is reported on a Canadian tax return.

Canadians can own real property in the USA. In fact, anyone may own property in the United States, regardless of their citizenship. It is important to note that if you buy property in the U.S., you still must abide by laws about the length of your stay in America.

For Americans, the taxes you owe on foreign real estate are largely identical to the taxes you owe on domestically held properties, but there may be different laws in the country your property is in which you must follow.

No, foreign real estate taxes are not deductible as part of your itemized deductions. Click here to see applicable rules. You can include the amount paid as part of your basis when you report the sale of the property on your US tax return. Click here to learn more.

A property should never be transferred to a family member for sale proceeds that are less than the fair market value (“FMV”) of the property. Doing so would trigger double taxation, where both the transferor and the recipient can be taxed on the same growth.

A Canadian can stay in the US for a maximum of 6 months from the date of entry, BUT any exit and re-entry resets the clock. Of course, Canadians should be careful doing this, as too many exits and re-entries within a given period might cause CBP officers to infer an intent to reside on the part of the Canadian visitor.

US Tax Treaty Exemption

If you stay in the United States past 182 days (roughly six months), you may be able to receive an exemption under this policy.

There are no restrictions on non-Canadian ownership, which means that as an American, you have the same property rights as Canadians. This welcoming environment has contributed to Canada's popularity as a destination for international property buyers.

You do not have to report your foreign property on your tax return. However, if you are renting the foreign property you must report foreign rental activity on your U.S. tax return just like you would report any owned U.S. property.

How can the US avoid capital gains tax on foreign property? ›

If you sell your foreign property, you may be able to make a 1031 exchange (also called a like-kind exchange), in which you swap one investment property for another similar property on a tax-deferred basis. Many investors use this strategy to defer paying capital gains and depreciation recapture taxes.

Do I have to pay taxes on foreign inheritance to the IRS? Do I have to pay taxes on foreign inheritance to the IRS? No, the IRS does not impose taxes on foreign inheritance or gifts if the recipient is a U.S. citizen or resident alien.

In Canada, any taxable capital gain from your U.S. vacation property, after claiming the PRE, is taxed at graduated federal and provincial tax rates. A foreign tax credit is generally available for tax paid on capital gains in the U.S. to reduce the amount of Canadian tax that you will pay.

Canadian tax residents are taxed on all income, regardless of where it's earned. Nonresidents are taxed on income from employment, business in Canada, investments in Canada and/or capital gains from the sale of a Canadian property.

These items include the following: Real or immovable property situated in Canada. Certain property used or held in eligible capital property in respect of a business carried on in Canada. If the taxpayer is an insurer, its designated insurance property for the year.

The estate of a Canadian may be subject to U.S. estate tax if the Canadian owned U.S. “situs” property (U.S. assets) at the time of their death, including investments held in registered accounts – such as Registered Retirement Savings Plans (“RRSPs”), Registered Retirement Income Funds (“RRIFs”) and Tax-Free Savings ...

Canadian resident taxpayers must report and include in their income for Canadian tax purposes all the income they earn from foreign property, regardless of the cost amount of the foreign property. If the cost amount of the taxpayer's foreign property exceeds $100,000, the taxpayer must also file Form T1135.