Are There Tax Implications to Canadians Purchasing US Property?
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I've asked Kerry Blain, a tax accountant, about financing the investment in US properties and taxes. Here's my understanding of what he had to say:
Answer: Before investing, you should consult with your own income tax consultant when planning this type of investment as the comments below are general comments only. Outcomes could vary depending on your own circumstances and constantly changing legislation and/or the tax treaty.
If you need to finance a purchase, consider using a US bank as there can be complications borrowing in Canada for a US property. When selling, if not a US citizen, you will normally be required to file a 1040NR (non-resident tax form). US citizens will file a 1040. Similar to Canada, the US has a tax withholding process when a property closes, which barring certain exceptions, your lawyers/agents will deduct from the sale of the home. This could force you to file a tax return the following year in February to recover any extra taxes you've paid.
In the US, properties are normally taxed at a maximum rate of 15%. You may be taxed on the recapture of any depreciation claims.
In Canada, disposition of investment properties eligible for capital gain treatment are normally taxed on 50% of the gain. You may be taxable on recapture of any capital cost allowance clains at your marginal tax rate.
Any US tax ultimately paid by way of US filing would normally be available for credit as a foreign tax credit under Canada's tax system. Depending on your situation there may be little or no additional Canadian income tax on the sale.
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Invest in US Real Estate!
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Check out this course:
Real Estate as an Investment – Buying and Selling for Investment
FOCUS: CMHC Victoria Market Report and US INVESTMENTS
Guest Speakers - Mortgage Broker Rene Boutin
Juan de Fuca Recreation Centre - Spinnaker Room Apr 7, 2008 7:30-9:30
This 1½ to 2 hour seminar will inform those who want to purchase real estate as an investment. How's the Victoria Market doing? I've got the latest CMHC Real estate report. We’ll talk about purchasing a home for the purposes of renting it. What are the short term and long term implications of doing this? How can you avoid common pitfalls? How do you screen tenants? What are the financial benefits of renting? Is there a difference if you live in the home? Investing in the US... how you can do it.
This course was designed by Jane Johnston, Realtor and Teacher. For more information about the seminar, call Jane at 744-0775. Register at Juan de Fuca Recreation Centre. Cost $15*
*Not intended to solicit buyers or sellers currently under contract with a REALTOR(R).
Why Invest in the US Housing Market Now?
Opportunity! As an example, in Phoenix and the surrounding area, there are currently over 55,000 homes listed on the MLS. The norm is around 35,000. There is a huge surplus in this and other markets, and with that surplus comes opportunity.
Bank-owned properties means quick sale!
Many of these homes are bank owned, with the bank willing to take a huge price reduction to sell the property. Most of these homes are in great shape; the sellers are motivated to sell.
Take Advantage of Our Strong Canadian Dollar!
The Canadian dollar is in the best shape it's been against the US dollar since the 70's. What an interesting time for an investment!
Timing!
 Are you thinking winter home, rental property, retirement? Now's the time to do it. Once the surplus is sold, home pricing will rebound and the market will climb. Your investment could double, even triple and the home you purchased could be free and clear. What would you do with that money?
Location! Specialised and Professional Help in Property Searching
Where is your ideal place to retire? I have a network of realtors willing to help you with local information throughout the US.
Weather!
Parts of the US sport a warm, dry environment great for Canadian snowbirds looking for an inexpensive place to settle down during Canada's cold winter. Check out the weather banner on the right hand side to see today's weather in Arizona and other places.
What to do in Phoenix!
- Year round golf and tennis.
- Active retirement communities: Communities have their own golf courses, club houses, rec centers.
- Host of the Barrett-Jackson auto auction every year.
- 2008 Super Bowl hosts
- Phoenix International Raceway.
- Lots of lakes and water sports.
- Situated just 6 hours from Las Vegas, Los Angeles, San Diego and Puerto Penasco, Mexico.
Others who have chosen to live in Phoenix: Victoria raised Steve Nash who plays for the Suns,. Alice Cooper, Stevie Nicks and Mohammed Ali.
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Jane, Please Contact Me With More Information
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Do you find this information useful? Would you like to know more? Please contact me.
Sincerely, Jane Johnston, M.Ed.
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See Some Available Properties
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These Properties are updated periodically. Click here to see what range and style of homes is available. LP designates Listing Price.
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