purchasing rental property in canada

fyusuf · Post by **fyusuf** » Tue Feb 03, 2015 11:02 pm

Hi,

I'm trying to determine if it is worthwhile tax wise to purchase a rental property in Canada. I am a Canadian citizen currently residing in the US on a TN for the last 2.5 years. I don't currently have any tax obligations in Canada. I understand that my rental income will be taxed in Canada at 25% and I think that I can claim back the tax paid in the US on my us tax return. Can you provide a sample calculation of how this claim works on the us tax return? My guess is that I would have to claim the rent from Canada as income on my US return, then claim that I have paid x amount of dollars already to the CRA and that would cover me for us taxes on that income, is that essentially how it works? Would it simply be a wash in terms of taxes? or is there any potential of reducing that 25% through the deductions or expenses on the US return?

Hope my question makes sense...

thanks for your help!

Faraz

nelsona · Post by **nelsona** » Tue Feb 03, 2015 11:11 pm

In Canada you wil lend up paying 25% tax on the NET rent.

In US the net rent will be added to your income, and the Cdn tax you paid will be partially credited on your return. You will pay a little more in US and state tax.

So, it would be better, from a tax point of view to have this property in US.

fyusuf · Post by **fyusuf** » Wed Feb 04, 2015 2:19 am

Can you please clarify what is meant by NET rent? Does that mean :
Net Rent = Rental income - expenses - mortgage payment

or does mortgage payment not come into that equation?

Thanks,
Faraz

nelsona · Post by **nelsona** » Wed Feb 04, 2015 11:10 am

Are you not familiar with what net rental income is? It is the rent minus expenses related to that rent. On US in also MUST include depreciation; in canada CCA is optional.

If any of these terms are unfamilar, I would sugest doing some research before buying any rental property anywhere.