Tax Obligations for US Citizens in Canada | McEvoy Lelievre & Associates | Ontario

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I am a Canadian selling property in the U.S. – do I have to file or pay U.S. taxes?

There are a number of different possibilities for Canadian citizens selling property in the U.S., which a U.S. tax filing expert can talk you through.

Most likely, the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding applies to foreign persons on dispositions of U.S. real property interests with some notable exceptions.

It will mean you will need to get an Taxpayer Identification Number in the U.S. to do filings.  Whether or not you ultimately pay any tax in the U.S. will depend on whether you have a capital gain or loss on the property based on your selling price, and your cost of the property, and other capital costs put into it.

However, before that step, a withholding tax of 15% will likely apply unless some very specific exemptions apply. You have to file a U.S. return to get back any part of that withholding you may still be entitled to.

Given enough advance notice you can also apply for a reduced withholding certificate from the IRS in order to reduce the withholding tax obligations on the sale of the property.  This takes at least a couple months, maybe more so often times this requires a patient buyer.

If you are a U.S. person buying a property from a foreign person, you have an obligation in this transaction to ensure the withholding taxes are handled correctly, so be sure that you, or your legal counsel has handled this correctly, or you could end up on the hook for some tax.

Need some help sorting out your Canadian Tax vs US TaxGive us a call today!

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