rent to own

eortlund · Post by **eortlund** » Sat Jun 11, 2016 12:55 pm

We have someone interested in possibly doing a rent-to-own deal with our house in Canada. As you know, we will be non-resident soon.

How much complication would this add to our reporting to CRA and IRS? Any other downsides to be aware of?

nelsona · Post by **nelsona** » Sat Jun 11, 2016 6:12 pm

Rent to own doesn't mean anything special. Its rent. You will have rental income to report to Canada, US and wherever you live. your rent tax will be withheld monthly to CRA, as has been covered here many times.

eortlund · Post by **eortlund** » Sat Jun 11, 2016 7:14 pm

And then any down payment or rent credit is taxed at 25% as well?

nelsona · Post by **nelsona** » Sat Jun 11, 2016 7:59 pm

Well, a lot depends on the contract you have. Technically, each "rent" is apayemnt on the house, which would be cap gains.

I would steer clear of this as a non-resident owner/seller. Sell or rent.

nelsona · Post by **nelsona** » Sat Jun 11, 2016 8:23 pm

The reason is that since this was your principal residence, you will not any cap gains tax until after one year renting, so you will have withholding for nothing. Same in US, except that is for three years. You are getting into a very complex tax and accounting situation.

Find a worthy buyer. rent to own has no advantages to the seller in any situation, much less a non-resident.

eortlund · Post by **eortlund** » Sat Jun 11, 2016 10:46 pm

Thanks for weighing in. Hoping to find a buyer soon. If we haven't found one by fall, perhaps we would rent out the house, but avoid a rent to own.

nelsona · Post by **nelsona** » Sun Jun 12, 2016 8:47 am

I agree. Rent to own you are lierally selling your home piece by piece.