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QUESTION:
I am a Canadian living and working in the US for the past 3 and 1/2 years.
I currently hold a H1-B visa and my company has filed a green card
application for me.
I am interested in buying property in Canada.
What are the basic tax implications on both sides (US and Canadian)?
Will I have to pay Canadian income tax if I hold property in Canada?
Also, will this affect my non-resident status in Canada and will it affect my green card
application in the US?
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david ingram replies:
If you buy vacant property or a seasonal residence that you use yourself and NEVER EVER rent out, there are no immediate tax consequences on either side of the border unitl you sell it or give it away or die. The bonus is that you can deduct the Canadian property tax and the interest on a mortgage on your US tax return on Schedule A.
If you buy property to rent out, you have another kettle of fish.
1. You need an agent to sign form NR6 for you. The form must be submitted before your first month's rental or your tenant has to remit 25% of the gross rent to the CCRA as a non-resident tax deduction. This is a responsibility. the agent agrees to pay your tax for you if you do not. You can find form NR6 at http://www.ccra-adrc.gc.ca/E/pbg/tf/nr6/nr6-00e.pdf
2. Your agent must file an NR4 tax return by March 31st of the year folowing trhe firat rental and every year thereafter. This is similar to a US 1042S form.
3. You need to file a Canadian Rental return under section 216(4) to report the Canadian rental income to the Canadian Government. This form must be filed by June 30th of the year following trhe first months rental and every year thereafter.
4. You need to convert the Canadian rental figures and put them on a US 1040 on schedule E. If there was any tax paid to Canada, you would claim credit on your US 1040 by filling in form 1116.
5. If sold and there is a profit, you will pay tax to canada first and then report the same profit to the USA. If there was any tax, you would claim credit as above on Form 1116.
6. This does not affect your green card status and if you are in the US most of the time, it will not affect your tax status in Canada other than as above. GOTO www.centa.com and read [US / CANADA TAXATION] for more information on the tax between Canada and the United States.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
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