Moving to the US, buying Canadian Property

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suwoo
Posts: 3
Joined: Sun Jun 06, 2021 2:58 pm

Moving to the US, buying Canadian Property

Post by suwoo »

Hi all,

On June 20th, 2021, I'll be moving to California on a TN visa for work. I currently work as a Canadian employee for the same company but will become a US employee on the date mentioned earlier. As well, I've just purchased a property in Canada for my parents to live in, and it'll close on Sept 1, 2021. My goal is to avoid being taxed in both the US and Canada on my income -- ideally taxation would be limited to just the US since Canada taxes at a higher rate in my situation.

From what I understand, I have a primary residence in Canada and so I'm a tax resident of Canada. As well, I'll pass the US SPT for 2021 and onwards, qualifying me as a resident for tax purposes of the US. This puts me into the US-Canada Tax Treaty tie-breaker for determining residency status.

I'll be renting in the US but I'm unsure if that counts as a "permanent home" per the first rule in the tie-breaker. I'm looking for advice on what the best steps are to reduce (as much as possible) my Canadian taxes.

Note: some things I'm considering include renting the property out to my parents (at or below fair market value, not sure which is more tax efficient).

Appreciate any help or advice!
suwoo
Posts: 3
Joined: Sun Jun 06, 2021 2:58 pm

Re: Moving to the US, buying Canadian Property

Post by suwoo »

I'd also appreciate if folks could point out the relevant tax forms I'd need to fill out, as well as recommendations for accountants who could help out.
bluesky
Posts: 31
Joined: Sun Mar 29, 2020 11:01 am

Re: Moving to the US, buying Canadian Property

Post by bluesky »

Rent out your residence in Canada, and sign year-long leases in US. That will satisfy US residency rules (along with canceling Cdn healthcare, moving account addresses, etc)
suwoo
Posts: 3
Joined: Sun Jun 06, 2021 2:58 pm

Re: Moving to the US, buying Canadian Property

Post by suwoo »

Thanks for your response! I have some follow-up questions.

1) Will a 1-year lease satisfy the "permanent home" condition in the Can-US tie-breaker rules?
2) Does it matter if I rent at or below fair market value?
3) Does it matter that I'm renting to my parents who are at non-arm's length?

If i'm renting at fair market value, I think there's a 25% cdn tax on rental income for non-residents. I guess I could reduce that by deducting property tax + mortgage interest, etc. But, will I need to report that on my US tax returns?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Moving to the US, buying Canadian Property

Post by nelsona »

By treaty, once you move to US to live and work, with any dependents, you will be considered US tax resident and Cdn tax non-resident, even with a non-arm's length rental, or even if you keep the house for yourself. Those rules about not having a place to live, and arm's length, etc do not apply when moving to a treaty country like US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
bluesky
Posts: 31
Joined: Sun Mar 29, 2020 11:01 am

Re: Moving to the US, buying Canadian Property

Post by bluesky »

One additional consideration to remember is BC's vacancy tax on property, even when renting out to non-arm's length parties.
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