US Citizen purchasing permanent resident home in Canada with Canadian fiance

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KeeyaX
Posts: 2
Joined: Wed Apr 20, 2022 6:32 pm

US Citizen purchasing permanent resident home in Canada with Canadian fiance

Post by KeeyaX »

I am a US Citizen and Canadian Permanent Resident since 1998, living full time in Canada. Annually, I pay Canadian income tax and file US FBAR and 1040, but do not pay US income tax as all my income is excluded using form 2555.
My fiancé is Canadian citizen paying Canadian income tax.
We both live in Canada and are looking to get a home together before getting married. We are currently trying to plan the purchase to have minimal tax consequences in Canada and US.

1. Can I avoid future capital gains tax on the sale of a principal residence by keeping my name off the title of the property and only being the spousal guarantor on the mortgage? (i.e. my name is not on the house, but it is on the mortgage).
As a US citizen I’m aware that I would have to pay US tax on capital gains on the sale of a principal residence at 15% or 20% for any amount in excess of $250k. Can this be avoided if I just don’t have my name on the house title? However, I would need to be kept on the mortgage in order for us to be able to borrow enough and I would be helping with the mortgage payments. If I’m helping financially and I live in the house would that negate any attempts to avoid the capital gains? I don’t think the “community property” rules would apply since we both live in Canada.

2. If I keep my name off the house title, and contribute to the down payment, would the amount of the down payment (in excess of the $15K annual exemption) be subject to US gift tax?

3. I heard that as a US citizen I may have to pay a foreign exchange rate tax on final mortgage payment if the Canadian dollar fell by the time I finish paying the mortgage. Is this always applicable?

4. If I keep my name on the title of the property but obtain my Canadian citizenship and relinquish my US citizenship before selling the house or paying of mortgage, can I avoid the capital gain and foreign exchange taxes. This is assuming I do not classify as a covered expat and don’t have to pay exit tax. (My income won’t exceed the ~$170K thresholds, or have over ~$2M in net worth, and I have always filed my US taxes).

5. Lastly, are there any US tax filing obligations for my husband after marriage? I will continue to file the FBAR and include any joint accounts. Additionally, I plan to file as a ‘married filing separately’ status going forward.

Thank you so much for any advice or help that you can give!
nelsona
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Re: US Citizen purchasing permanent resident home in Canada with Canadian fiance

Post by nelsona »

Remember that 2555 only applies to earned income (wages) not investment income.
Answers later
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: US Citizen purchasing permanent resident home in Canada with Canadian fiance

Post by nelsona »

1, Yes you can avoid it, but you are giving up a lot. You do realize that your house would have to gain $500K before you had any US tax liability. So why give up ownership?

2 It would be a gift, bu there are higher limits.

3. Yesm but not something to worry about. There will be no cataclysmic drop in C$, becasue it has not risen.

4. I never advise relinquishing. Just sell your house when it makes $400K
5. No tax filingd, if you file MFS. Just joint FBAR.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
KeeyaX
Posts: 2
Joined: Wed Apr 20, 2022 6:32 pm

Re: US Citizen purchasing permanent resident home in Canada with Canadian fiance

Post by KeeyaX »

Thanks nelsona for the quick answers - that helps a lot!
fazert
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Joined: Mon Jun 05, 2023 9:53 am

Re: US Citizen purchasing permanent resident home in Canada with Canadian fiance

Post by fazert »

I’m not sure if this is so) although thanks
ND
Posts: 291
Joined: Thu Feb 21, 2013 5:28 pm

Re: US Citizen purchasing permanent resident home in Canada with Canadian fiance

Post by ND »

RE: You do realize that your house would have to gain $500K before you had any US tax liability.
Not so, only 250k as she stated, as her status is MFS. But, only half the gain would be hers.
And yes, that's precisely the planning used - for NRA to hold entire title and if already jointly bought then to , over a number of years so as to avoid marital gift tax, transfer pieces of USC's half to NRA spouse.
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