Canadian citizen, US resident.
Have a rental property in Canada that is now positive in Canada (ie: income - expenses > 0). Do not depreciate in Canada.
I remitted the withholding tax in Canada monthly via property manager and as some thousands of dollars, wonder if this can be applied as a loss, expenses, etc. on my US taxes?
Thanks.
Can Canada non-resident withholding tax be applied US taxes?
Moderator: Mark T Serbinski CA CPA
First, you need to submit your 216 return to CRA, to determine the exact NRF tax on your rental income. This is the figure you should use on your form 1116, against the net renatl income you show on your 1040 for this Cdn property.
Some or all of the Cdn tax will be used to lower your US tax on the rental.
The problem most in your situation face is, by not depreciating in Canada, and having to in US, you bnever have enough income reported on US return to get any credit.
It usually better at that point to begin depreciating in canada, so that you are not paying tax in either country. That way, When you sell later, the taxes will also be better meshed in US and Canada.
Some or all of the Cdn tax will be used to lower your US tax on the rental.
The problem most in your situation face is, by not depreciating in Canada, and having to in US, you bnever have enough income reported on US return to get any credit.
It usually better at that point to begin depreciating in canada, so that you are not paying tax in either country. That way, When you sell later, the taxes will also be better meshed in US and Canada.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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joe_canuck100
Thanks Nelson.
I now understand that I should now start depreciating in Canada.
So, let's say the property netted $10K CDN. I would remit 25% of the net meaning $2.5K CDN to RevCan. However, if I depreciate, then I would depreciate the $2.5K CDN and this would bring my profit to $0 CDN meaning money back from RevCan for amounts paid for 2012, correct?
But for the US taxes.
The property still netted $10K CDN, so about $10K US. Using the scenario above, I got all my CDN tax back so I wouldn't apply, or fill out, anything on US taxes?
Also, the net $10K US is still that - a profit right? So my income in US is $10K higher - and taxable in US - correct?
Thanks again.
I now understand that I should now start depreciating in Canada.
So, let's say the property netted $10K CDN. I would remit 25% of the net meaning $2.5K CDN to RevCan. However, if I depreciate, then I would depreciate the $2.5K CDN and this would bring my profit to $0 CDN meaning money back from RevCan for amounts paid for 2012, correct?
But for the US taxes.
The property still netted $10K CDN, so about $10K US. Using the scenario above, I got all my CDN tax back so I wouldn't apply, or fill out, anything on US taxes?
Also, the net $10K US is still that - a profit right? So my income in US is $10K higher - and taxable in US - correct?
Thanks again.
I think you are missunderstanding how depreciation works, and how NR tax works.
First, you, or your agent, need to be remitting the NR tax on a monthly basis, not at year end. Surely this is what you have been doing since you left US. no?
second, depreciation is dome BEFORE calculating the final tax. So you prepare your rental income/expense staement to figure your profit, and do your CCA, depreciating the maximum you are allowed, or the amount you calculted as profit, which ever is greater. You then use this CCA to reduce your profit, report this on your 216 retrun, and this get a full or partial refind of what was withheld. The amount you calculated on your 216 is the amount you can use on your 1116.
In the US, as you know you should have been deprciating all along, so I'm sure that your propert is NOT netting any profit, or certainly smaller than your Cdn profit. whatever, this is the amount that you use as foreign income (you would of course have reported it as renatl income, schedulke E, and 1040), and you will be ablew to get some tax back (if you paid any in Canada) on 1116.
First, you, or your agent, need to be remitting the NR tax on a monthly basis, not at year end. Surely this is what you have been doing since you left US. no?
second, depreciation is dome BEFORE calculating the final tax. So you prepare your rental income/expense staement to figure your profit, and do your CCA, depreciating the maximum you are allowed, or the amount you calculted as profit, which ever is greater. You then use this CCA to reduce your profit, report this on your 216 retrun, and this get a full or partial refind of what was withheld. The amount you calculated on your 216 is the amount you can use on your 1116.
In the US, as you know you should have been deprciating all along, so I'm sure that your propert is NOT netting any profit, or certainly smaller than your Cdn profit. whatever, this is the amount that you use as foreign income (you would of course have reported it as renatl income, schedulke E, and 1040), and you will be ablew to get some tax back (if you paid any in Canada) on 1116.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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joe_canuck100
Thanks Nelson.
In Canada, on the remittance of NR tax, up to 2012 I haven't had to remit any as expenses exceeded income and therefore, no monthly tax remittance required.
In 2012, when I consulted the property manager that I thought it would be positive, an amount was remitted every month (actually doubled starting in July/2012 to make up for an estimate for 2012 all of 2012). So, yes, I remitted money monthly as of 2012 and still do.
However, I notice that what I remitted probably won't cover what's due for all of 2012, so I'm assuming that could be made up before the June/2013 filing date (or at the same time).
Once I've got my real amounts for 2012 figured (income, expenses), I will get my Canadian accountant to use depreciation to offset what I can to the amount that was remit for 2012, correct?
As for the US, as 2012 is the first year it will be positive and the amount made will still be positive even after US depreciation, I'm sure it'll just become more income to me for 2012, correct?
Yes, I've been reporting it as rental income on schedule E, and 1040, etc. but it's the getting some tax back paid to Canada on 1116 that you mention that I'm not sure about as I haven't had to deal with that so far on my taxes in the past.
In Canada, on the remittance of NR tax, up to 2012 I haven't had to remit any as expenses exceeded income and therefore, no monthly tax remittance required.
In 2012, when I consulted the property manager that I thought it would be positive, an amount was remitted every month (actually doubled starting in July/2012 to make up for an estimate for 2012 all of 2012). So, yes, I remitted money monthly as of 2012 and still do.
However, I notice that what I remitted probably won't cover what's due for all of 2012, so I'm assuming that could be made up before the June/2013 filing date (or at the same time).
Once I've got my real amounts for 2012 figured (income, expenses), I will get my Canadian accountant to use depreciation to offset what I can to the amount that was remit for 2012, correct?
As for the US, as 2012 is the first year it will be positive and the amount made will still be positive even after US depreciation, I'm sure it'll just become more income to me for 2012, correct?
Yes, I've been reporting it as rental income on schedule E, and 1040, etc. but it's the getting some tax back paid to Canada on 1116 that you mention that I'm not sure about as I haven't had to deal with that so far on my taxes in the past.