Canadian Citizen/Resident With US Rental Property



I was hoping you could answer a few questions for me. I am a Canadian citizen who has been working in the US on TN Visas for ~ 4 Years. I am current planning to move to Canada but prior to leaving I am considering buying a US rental property. What are the Tax implications of doing this? Does the income produced from this property have to be declared in both the US & Canada? Can the property depreciation be claimed when filing a Canadian Tax return? Are the professional service used to manage a US property deductible? Are trips to visit and provide maintenance to the property deductible ? Would owing a US property have any bearing on being approved for further mortgages in Canada? Any other info or direction would be greatly appreciated.

Thank you

david ingram replies:

Any non-resident of the United States who owns rental property must file a 1040NR and Schedule E to report the rental income. In addition, a state return must be filed if the property is in a state with a state return.

The rent must also be reported on your Canadian T1 return on form T776. If tax was paid to the US, you would claim a foreign tax credit on Schedule 1 of the Canadian return and the relative schedule (usually 428) for the province you are living in.

Your professional fees to manage the property are deductible in both countries along with mortgage interest, property taxes, condo fees, repairs and maintenance, bank charges, etc. The US allows depreciation as a deduction and Canada allows CCA (Capital Cost allowance) as a deduction.

If you do not have a working visa, you may NOT perform "any" maintenance to rental property in the US. You cannot change a doorbell, sweep the front steps or paint the kitchen. NOTHING. If you do and are caught by Homeland Security, you will likely be arrested and held in a US immigration jail until you come up with $5,000 US bail. Then you will be banned form the US for five years.

Trips to look at your property are NOT deductible. Trips where you were actually going to paint and decorate are usually deductible (if no vacation portion exists). However, the last thing you want to do is put down that you traveled to the US to maintain your US rental property. You can be arrested retroactively for working last week or last year just as if you robbed the corner gas store two years ago and told a local police officer.

If the US property is an alligator and losing money, its existence will be a detriment to getting a Canadian mortgage. If it is making a profit, it will be an asset to getting a Canadian mortgage.


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