I am a dual US/Canadian citizen. I have lived in Canada for many years. I have three related questions that I haven't been able to find a clear answer to:
1. Can municipal property taxes be deducted on US returns (presumably as part of the foreign tax credit)?
2. If a US citizen sells their house in Canada -- their principal residence -- after X number of years and makes a profit on the sale, is that reportable on US taxes? If so, is it a capital gain or incomet?
3. If the answer to #2 is "yes" (and without suggesting that anyone consider evading the long-arm of the IRS mind you) on a practical level, how would the IRS possibly determine that a Canadian house has been sold for a profit -- especially since it is unreportable on Canadian returns? Would it not be out-of-bounds in terms of the tax treaty?
IRS house taxation in Canada
Moderator: Mark T Serbinski CA CPA
1. It would be deducted as real estate tax, just like if it was in US.
2. No. as long as you lived in the house 2 of the last 5 years (and did not rent it out), it is tax-free in US.
3. You are bound to report all income on your 1040, whether or not it is reportable in another country, whether or not you get a tax receipt.
2. No. as long as you lived in the house 2 of the last 5 years (and did not rent it out), it is tax-free in US.
3. You are bound to report all income on your 1040, whether or not it is reportable in another country, whether or not you get a tax receipt.
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Re: IRS house taxation in Canada
[quote="JohnSt"]I am a dual US/Canadian citizen. I have lived in Canada for many years. I have three related questions that I haven't been able to find a clear answer to:
1. Can municipal property taxes be deducted on US returns (presumably as part of the foreign tax credit)?
2. If a US citizen sells their house in Canada -- their principal residence -- after X number of years and makes a profit on the sale, is that reportable on US taxes? If so, is it a capital gain or incomet?
3. If the answer to #2 is "yes" (and without suggesting that anyone consider evading the long-arm of the IRS mind you) on a practical level, how would the IRS possibly determine that a Canadian house has been sold for a profit -- especially since it is unreportable on Canadian returns? Would it not be out-of-bounds in terms of the tax treaty?[/quote]
1. Yes - Schedule A
2. Yes - subject to the principal residence exemption rules in the US, i.e. part of it may not be taxable. The first $250K per person ($500k for a couple) of the gain may not be taxable in the US.
3. No, it is not "out of bounds". CRA and the IRS have an information sharing agreement, as well as an agreement to collect eachother's taxes if necessary.
1. Can municipal property taxes be deducted on US returns (presumably as part of the foreign tax credit)?
2. If a US citizen sells their house in Canada -- their principal residence -- after X number of years and makes a profit on the sale, is that reportable on US taxes? If so, is it a capital gain or incomet?
3. If the answer to #2 is "yes" (and without suggesting that anyone consider evading the long-arm of the IRS mind you) on a practical level, how would the IRS possibly determine that a Canadian house has been sold for a profit -- especially since it is unreportable on Canadian returns? Would it not be out-of-bounds in terms of the tax treaty?[/quote]
1. Yes - Schedule A
2. Yes - subject to the principal residence exemption rules in the US, i.e. part of it may not be taxable. The first $250K per person ($500k for a couple) of the gain may not be taxable in the US.
3. No, it is not "out of bounds". CRA and the IRS have an information sharing agreement, as well as an agreement to collect eachother's taxes if necessary.