Desert and beachfront areas are both seeing their share of international shoppers seeking sunny vacation getaways.According to one well-known international tax expert, buying and owning US real estate is no more complex that purchasing and owning in your own province -- as long as you follow all the income tax rules involved. It's not the properties, but legal and tax differences between the two countries, and variations between states, that add complexity. The solution? David Ingram, Principal of Vancouver-based CEN-TA Services, suggests you search out a Canadian income tax advisor, experienced in dealing with US taxes, before you locate the US property of your dreams. US tax advisors know their own federal and state tax issues, but Ingram says they are rarely familiar with the complexities of Canadian income tax law because, with a population 10 per cent of that in the US, Canada's tax issues are not mainstream knowledge in the US.
"Ask what forms should be used," said Ingram suggesting one way to determine whether an accountant or other tax advisor has hands-on practical experience filing US returns. Ingram is not a chartered accountant, but graduated from the University of British Columbia's Urban Land Economics program and claims 43 years experience with tax, real estate and immigration issues, much of it in the public eye through the media, his books and the Internet. He stresses the importance of settling on a tax advisor early on, but does not believe that the choice of state or property should be based on tax laws since filing rules change each year for federal, state and provincial tax. Whether considering a snowbird vacation condo or accepting a job transfer to the States, cross-border buyers typically seek out professional advice for the actual purchase and move, but ignore tax and estate planning until tax time or a crisis. That after-the-fact approach removes the opportunity for overall estate planning and tax minimization.
Ingram offers these tips and suggestions for Canadian considering US real estate ownership:
Some states, like California and Vermont, have state income tax while others, including Florida and Nevada, do not: "It is irrelevant if you pay state tax or not as it is just a function of [US] federal tax ... ."
Rent out your US real estate and the rental income must be reported on a federal and any state return required. Tax schedules are used to calculate depreciation, an allowable expense on income properties. On Canadian returns, the capital cost allowance schedule covers depreciation.
Marital status and who owns the US property is important, too. If both spouses are on title, then both must file federal and state returns. Failure to file may carry penalties as much as 30 percent of the gross income, with no expenses or deductions allowed.
Canadians who rent in Canada may be entitled to a capital gains exemption if they designate their US property as principal residence. This would make any profit earned when the real estate is sold exempt from Canadian, but not US, tax.
Province of residence is an issue too. In Ontario, 153 days of residency should qualify you for OHIP, but in other provinces, more than 183 days are necessary for coverage by the provincial health plan.
Canadians paying US tax may claim foreign tax credit federally and provincially.
"I see more clients with successful rental properties in the United States than here in Canada," said Ingram, who finds many clients rent out their US property or buy through a shared program like hotel condos. "When they buy in the United States, they tend to do a better job with their investment. They pay more attention to details. We rarely have someone coming in with a loss in the US."
Researching government resources will also be useful, for example:
If you were born outside Canada after Feb 14, 1977, you may need to take steps to keep your Canadian citizenship;
Keep up to date on changes in US Entry Requirements through the federal Canada Border Services Agency; The Canada Revenue Agency (CRA) taxes your US income, except US lottery or gambling winnings. The CRA includes suggestions in its report "Canadian Residents Going Down South" for Canadians who spend part of the year in the US and still maintain residential ties in Canada.
There are two books you might want to invest in that you can review regarding Snowbirds, one is called The Canadian Snowbird in America by Terry F. Ritchie and the other is The Border Guide â€“ A Guide to Living, Working and Investing Across the Border by Robert Keats. Both are available on Amazon.com. Any Canadian who is buying property in the US should have these books! Thereâ€™s lots of good info in them.
An accountant other Canadians have used for their US property is a Canadian accountant, but he also has his CPA designation. His name is Darren Millard, LDMB Advisors Inc. email firstname.lastname@example.org, phone 604 534-3004. You might also want to consult with him.
I hope this has been helpful.
I have no idea why anyone told you to buy under a corporate name for tax purposes. Your Canadian accountant can tell you if there is an advantage in Canada for doing this, but this would not pertain to US Taxes.
When you purchase a home in California, you are taxed each year at 1.25% of what you paid for the property. If you paid $300,000, you would be taxed each year $3750. Everyone pays these state taxes, all homeowners.
No, you would not be filing for any taxes in the US unless you worked and were paid in the US. Then you would pay taxes and also need a social security number.
As for a loan, you would need to obtain a loan in the US, as Canadian banks do not lend on US property. I would be happy to put you in contact with a lender familiar with loans to Canadians. Just email me and I'll put you in contact with them.
NOW is an excellent time to buy as your dollar is strong and our prices are very attractive. Many Canadians have bought, and continue to buy here because of that. Prices do NOT go down in the summer. Sometimes summers are our busiest selling times because so many people, like yourself, think they go down.....but they don't!
If you purchase a foreclosed home, all your paperwork for a loan must accompany your offer showing you have been TOTALLY approved for your loan. Oftentimes there are multiple offers on foreclosed homes, and sometimes they sell higher than listed because so many people are trying to buy it.
When you submit an offer on a property in the US, it is customary to submit a check (in US funds) with the offer for 3% of the cost of the offer. On a $300,000 home, you would submit a check for $9,000 US dollars with your offer. If the offer is not accepted, the check is returned to you. If the offer is accepted, that amount is deducted from the total amount you would need to close. Closing costs are typically about 1% of the cost of the offered home. Most homes take about 4 weeks to close, some sooner, some a little longer.
You can contact me at email@example.com and visit my website at http://www.nancyhankin.com. I have been a Realtor in the desert for 16 years and I work with quite a few Canadians. When you are on my web site, go to TESTIMONIALS and you'll see a letter I recently got from fiur Canadian brothers.
I hope this answer has been helpful. I would also be willing to call you and talk to you at more lenght, but I would need your phone number .
I look forward hearing from you.
Nancy Hankin: Broker Associate
SRES,CRS & e-PRO
"Old Fashioned Service Using
New Fashioned Technology"
Remax Real Estate Consultants
74-199 El Paseo Suite 101
Palm Desert, CA 92260
(866) 227-2205 Toll Free
(760) 861-5118 Direct
(760) 779-8196 Fax
Access all Desert MLS Properties for Sale via my Website
For many of your tax questions you should consult a CPA or tax attorney. You will also want to consult an immigration attorney about status and social security number. You will have property taxes and they are different from city to city. A good rule of thumb is to calculate 1.25% for the taxes (on the purchase amount).
Will you have an income in the States?
You should be able to get a loan. I know of a loan officer who has worked with several Canadians to get them financed. If you email me I will send you her phone number.
Most foreclosure homes (bank owned) need a lot of work done on them.
Feel free to email me and I will try to get answers for you.