My question is: Applicable to both US and Canada
QUESTION: Is there a difference between taxes on rental income in Canada and
the US?
>From what I understand, you get taxed less with rental income than with
earned income in the States. Is this correct?. If so, does the same thing
apply to Canada?
Thanks.
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david ingram replies:
Both the US and Canada tax rental income at ordinary tax rates. There is no
special tax rate in either country.
The specific difference is that in the US, you are required to calculate
depreciation and use it even if it creates a loss on the income tax return.
In Canada, although there were specific exceptions from what is known as the
MURB program, no new purchaser is allowed to claim depreciation to create a
loss on the tax return.
Therefore, when we do a dual country return (our specialty), we will often
have a rental property creating a $1,000 or more refund in the US while
remaining revenue neutral in Canada.
Otherwise, a $10,000 rental profit (after depreciation) would be taxed the
same as $10,000 of earned income in the US or in Canada.
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