Hi there. I am looking into buying some property back in Canada.
I am a Canadian citizen, living in the US on an H1-B for the past three years.
We filed the proper 'leaving' taxes with RC upon our departure and of course pay down here to the IRS. I am wondering if I own property in Canada, how does the tax situation work?
Would I need to start filing with RC again, or would the property go into my IRS taxes like any other investment property?
Any major pitfalls to avoid, or advice?
Thanks for any help that you can offer.
Bill J
Canadian living in US buying property in Canada
Moderator: Mark T Serbinski CA CPA
Any income generated by the property -- rent and eventual gains when selling -- will be taxed in Canada and US. with US granting a tax credit for Cdn taxes paid.
One thing that you do have to watch for is buying property for your own use (ie. a cottage). CRA may view this as a sufficient residential tie so as to require you to file taxes in Canada (the US/Can treaty protects you from Cdn tax on your US income, but you would have to file).
If it is rental property, you will have to have the 25% GROSS tax withheld EACH MONTH and sent each month. You can apply (either beforehand or afterwards) to have this tax reduced to 25% NET tax, by filing an NR6form and 216 return. CRA has a good infosite on this.
In US you will have to report the rental income and expenses, like in Canada -- but you MUST depreciate your property in US (unlike Canada).
When it comes time to sell, you will have gains to pay in Canada and if you are still living in US, in US as well (with tax credited). If it becomes your principle residence at some point, gains tax may be reduced in Canada or eliminated in US.
<i>nelsona non grata</i>
One thing that you do have to watch for is buying property for your own use (ie. a cottage). CRA may view this as a sufficient residential tie so as to require you to file taxes in Canada (the US/Can treaty protects you from Cdn tax on your US income, but you would have to file).
If it is rental property, you will have to have the 25% GROSS tax withheld EACH MONTH and sent each month. You can apply (either beforehand or afterwards) to have this tax reduced to 25% NET tax, by filing an NR6form and 216 return. CRA has a good infosite on this.
In US you will have to report the rental income and expenses, like in Canada -- but you MUST depreciate your property in US (unlike Canada).
When it comes time to sell, you will have gains to pay in Canada and if you are still living in US, in US as well (with tax credited). If it becomes your principle residence at some point, gains tax may be reduced in Canada or eliminated in US.
<i>nelsona non grata</i>
Thank you Nelson, outstanding advice.
It looks like we will be moving ahead with a new townhome this spring, which we will then be renting out. I was wondering if you have any advice (or if anyone else does for that matter) on financing the property, i.e. approaching a Canadian Bank for a mortgage. As US Residents, with no credit activity in Canada while living in the US, what is the best way to tackle the issues I am imagining will arise? Can we point the Canadian Bank at our existing Canadian credit report and then at our new American one? Will there be other issues with us having primary residence in the US that may preclude our Canadian lender from approving us?
Or, can we simply go ahead and find a lender and get pre-approval, as is the normal procedure?
Thank you again,
Bill
It looks like we will be moving ahead with a new townhome this spring, which we will then be renting out. I was wondering if you have any advice (or if anyone else does for that matter) on financing the property, i.e. approaching a Canadian Bank for a mortgage. As US Residents, with no credit activity in Canada while living in the US, what is the best way to tackle the issues I am imagining will arise? Can we point the Canadian Bank at our existing Canadian credit report and then at our new American one? Will there be other issues with us having primary residence in the US that may preclude our Canadian lender from approving us?
Or, can we simply go ahead and find a lender and get pre-approval, as is the normal procedure?
Thank you again,
Bill