Canadian Citizen Moving to US

luder · Post by **luder** » Thu Feb 10, 2011 1:06 am

Hi,

I am a Canadian citizen who owns property (in Canada) and was offered a job in the US.

My plan is to rent out the Canadian property. It is my first year of home ownership and I took advantage of the Home Buyers Plan for which I have not started repaying yet.

Since i will still own the property (renting it out) but working in the US, am i responsible for immediately repaying my portion of the hume buyers plan or do i have to claim it as income?

Thanks,

nelsona · Post by **nelsona** » Thu Feb 10, 2011 5:20 am

The fact that you later rent out the property does not force you to immediately repay an HBP in its entirety (or include the unpaid portion as income).
However, as soon as you leave canada, regardless of what you do with the home, you are forced to either repay the entire HBP or include the unpaid amount it in your final Cdn departuree return.
From what you desxribe, you are becoming non-resident.

luder · Post by **luder** » Thu Feb 10, 2011 9:19 am

Thanks. I'm fairly new to this...assume I leave in April or May, would that mean my final tax return in Canada would be the following year? If so, how does the actual taxation work? Do I pay taxes in Canada for the beginning of the year (jan to april or may) and then pay taxes in the states for the rest of the year?

Seeing as I haven't started paying my HBP back yet and the balance is $25k, what would be my most cost effective options if I rented my home out (assuming I don't have the lump sum to pay it off)?

Thanks

nelsona · Post by **nelsona** » Thu Feb 10, 2011 9:27 am

I guess you misunderstood. You have no choice but to either pay it back within 60 days of leaving, OR include it in your Cdn income for this year. Since you aren't paying it back, you will owe the tax next spring - 2012.

Renting has no impact on this.

Your tax situation for the year will be roughly as you said, except that you will have to also set-up a means of having a portion of the rent sent each month to CRA.

luder · Post by **luder** » Fri Feb 11, 2011 9:13 pm

Thanks Nelson.

From what I understand, the rate/amount to set aside for CRA is 25%. Is that correct? Is the percentage calculated on the full rental payment or only on the profit (after mortgage payments)?

Thanks again

nelsona · Post by **nelsona** » Sat Feb 12, 2011 8:20 am

the witholding is 25% of gross, unless and until you file an NR-6 and get permsission to reduce thsi ammount.

In any event, at year end you get to file a 216 return on which you determine you net renatal income and get taxed 22% of that.

luder · Post by **luder** » Sun Feb 13, 2011 12:49 pm

From your experience, what is the likelihood of CRA reducing the witholding tax to 25% net ?

Also, if i don't make any profit off the rental (maybe even have to pay a bit out of pocket), do i have to pay the taxes at the end of year or is there an oppurtunity to get a return?

luder · Post by **luder** » Sun Feb 13, 2011 12:51 pm

And just to get your response straight, the CRA charges witholding tax of 25% per month as well as an additional 22% at the end of the year?

nelsona · Post by **nelsona** » Sun Feb 13, 2011 3:42 pm

You have to file NR-6 in order to reduce the rental monthly withholding. There is 100% chance they will reduce, but it takes severl montsh for approval.

Regardless of whether you file NR-6 or not, you will file a 216 return, and on that return, you will calculate your final tax on your rent. This will be about 22% of net, since you will include all rental expenses. The 25% withholding, or whatever was fianlly withheld, will be used towrds that bill, just like the taxes that were withheld at your job were used on your tax return.

You will not have both witholding and final tax to pay.

luder · Post by **luder** » Sun Feb 13, 2011 5:08 pm

Thanks for the information. You have been a great help!!!