Owning and/or Renting Out Your U.S. Property

Many Canadians own and/or are renting out their U.S. property. If you are in the process of purchasing property in the United States, be aware that there are differences in mortgage financing and how interest is charged between Canada and the U.S. In addition there are tax implications in both countries that you may be subjected to. Contact C2 Global Law in order to minimize your financial risk and tax liability.

DO I HAVE TO PAY U.S. INCOME TAX ON THE RENTAL INCOME?

If you are receiving rental income from real property situated in the U.S. you are subject to a non-resident withholding tax of 30% of the gross rental income.

DO I HAVE TO PAY THE 30% WITHHOLDING TAX?

You can avoid paying the 30% withholding tax by properly filing an election with the IRS and then filing a U.S. tax return and paying tax on the net rental income after expenses such as mortgage interest, maintenance, insurance, property management and property taxes have been deducted. However, once you file a U.S. tax return you will be expected to do so annually.

CAN I DEDUCT RENTAL EXPENSES?

If you rent out your property for a minimum of 15 days per year you can deduct rental expenses if you file a U.S. tax return and pay tax on the net rental income. There are other rules as well that may limit the amount of expenses that are deductible. Contact C2 Global Law for advice on rental expenses.

DO I HAVE TO DECLARE THE INCOME FROM MY U.S. RENTAL PROPERTY ON MY CANADIAN INCOME TAX RETURN?

Yes, you must report the income from your U.S. rental property to the CRA.

Contact C2 Global Law for information and advice on the best ways to maximize the potential of your U.S. rental property and minimize your tax liability.