My question is: Applicable to both US and Canada
QUESTION: I am a US citizien, living and working in US. I am interested in
buying a weekend home in the lakes region of Canada. I do not own any
property in the US and am not sure if the mortage will need to be given by a
US or Canadian bank. Also, will I get the tax write off for the mortage for
one or the other or both of these mortages?
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david ingram replies:
You will likely get a Canadian mortgage but will need 35% down payment as a
non-resident.
The mortgage interest and Canadian property taxes will be deductible on
Schedule A of your US 1040 and (by default) New York state return.
When you sell the property, you will have to fill in a Canadian form T-1 and
the tax to Canada will range from a low of about 11% up to $65,000 profit up
to about 44% if the profit is over $100,000.
When you then report the profit on your US return, the income will be on
Schedule D and you will be claiming a credit for the tax paid to Canada on
Schedule 1116.
It is also possible that you could claim the Canadian house tax free on your
US return if you manage to spend 2 out of 5 years there.
Non-residents can NOT claim a Canadian house of cottage tax free for
Canadian tax purposes.
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