US CANADA capital gains tax on house bought in Canada by US Citizen - T2062, T1159; T776; Sched E Sched 1116


I'm not sure how to proceed in terms of providing
necessary information to the Canadian government
regarding the sale of my house in Canada.  I am a US
citizen working in Oregon. I had partially retired so was
living in Canada (primary residence was the house in
Canada).  I originally bought the house with US$ after the
sale of a home in the US. Now that I've sold the Canadian
house, the attorney is holding 25% of the sale amount in
trust until the capital gains tax can be determined.  I'm
not certain what I need to provide, what I need not
provide, etc.  If I purchase another home in the states with
the profit, do I have to pay Canadian capital gains tax?

david ingram replies:

If you were a legal resident of Canada at the time, all or part of the capital gains should be free of Canadian Capital gains tax.

If you were not a legal resident but merely a visitor, then 50% of the gain is taxable at a rate running from  22.57% (up to about $37,000 of taxable profit which means $74,000 of actual capital gains) ) to 42.92% on amounts over about $119,000. with two progressive jumps in between.

If this house was your only residence and you lived in it for 24 out of the last 60 months before sale, up to 250,000 is tax free on your US return.

You should have filed Canadian Form T2062 to notify the CRA of the sale and have a reduced withholding tax.  This is the kind of thing that we can do for you or your attorney.

The T2062 must be filed within 10 days of the actual sale or there is a $25.00 per day penalty.   There is no rollover provision in Canada unless the property has been expropriated by a government authority for the common good.  This usually means it was expropriated for a bridge approach, a highway or the Burnaby library parking lot.  The US did allow the rollover for family houses up to 1997 and still does allow a rollover for investment properties under section 1031.  However, the US does NOT allow that rollover if the property is in different countries (although it did until 1986).   This older Q & A will help as well.


  QUESTION: I have moved to the US since 2000 and current a green card holder. I still have a property in Canada and currently listed as second home in the US tax return. I am planning to sell this property in the near future. Do I need to pay capitial gain tax in both US/Canada and how much?

david ingram replies:

It sounds like the second home in Canada has being sitting empty.

When you sell it, the purchaser's lawyer is going to withhold 25% of the gross sale price as Canadian Withholding Tax - UNLESS - you file form T2062 within 10 days of the sale.  .

T2062 -

The purpose of the T2062 is that it will identify the value of the house the day you crossd the border and the purchaser will only have to withhold tax on 25% of the difference invalue between the day you left and the day you sold it.You can NOT claim real estate commissions and other costs of sale on this form which means when the return is actually filed there is always a refund..

THIS IS NOT THE TAX RETURN, it is merely a withholding tax form.


You will then have to file a tax return to report the sale next year.  This return will tax you on 50% of the gain by using schedule 3 and 1.  You can claim the real estate sales commissions, lawyers fees and other costs of sale at this point.  File a T1 tax return with Schedule 3 and Schedule 1.


Schedule 3 - Capital Gains -

Non-Resident Schedule 1 -

All these figures are then converted to US dollars and put on schedule D of the US return.  taxes paid to Canda are claimed on US schedule 1116.


If the property was rented, you also have to file form T2062A and make sure that your T1159 and T776 forms were filed for each year the property was rented.

T2062A -

T1159 -

T776 - (fillable)

If rented, make sure the T776 rental figures were converted to US dollars and put on schedule E.  Any taxes paid to Canada would go on the schedule 1116 you used for the capital gains tax paid.

Schedule E -

Schedule 1116 -

Note that the T2062 and T2062A forms will likely be the same from year to year.  However, the US and Canadian schedules shown above are all 2006 forms and you will need to get hold of the equivalent 2007 or 2008 forms when you actually make the sale.

And, of course, we can look after all of it for you when the time comes. That is what we do. �