QUESTION:
We are Canadian citizens living in the US due to my husband's work.we own
a property that has been rented out in BC,Canada.what would be the tax
implication on a situation like this..
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david ingram replies:
In Canada you have to file form NR-6 and have a tax agent sign it. The CRA
will issue a Non-resident tax number and your agent will file an NR4 Summary
and Supplementary by March 31 of the following year (Mar 31, 2005 for the
2004 tax year as an example)
You will then file a Canadian Income tax return under Section 216(4) of the
Canadian Income tax act and report the income and expenses to Canada.
Next you convert the figures to US dollars and fill out Schedule E and
attach it to your 1040 US return. If there were any taxes paid to Canada,
you will claim the Foreign tax credit on your US return by filing form 1116.
The following answer to another question will help.
============
QUESTION:
HI--
I am a US citizen living and working in the US. I am considering purchasing
a rental property in Vancouver, BC and wondered about the tax
consequences--both in Canada and the US. Would I need to pay taxes on the
income in Canada or US?
Both - Canada first on a Section 216 return with an extra schedule T776 - If
any taxes were paid to Canada, you would claim a credit on your US return by
way of form 1116. After converting the Canadian figures to US $$$, you
would have a small loss, not a profit.
Would I be able to deduct mortgage payments and condo fees and management
company fees as a business expense?
You can deduct "mortgage INTEREST" and condo fees and management fees in
Canada and the US.
If it was to be paid in Canada, would I only be taxed on the rental
income--not my personal US salary income.
Canada would not have a claim on your US income unless you were in Canada
very often on a continues basis.
Thank you!
KXXXXX XXXXXXXXXx
============================
david ingram replies:
Before you rent it out, you need to fill out form NR-6 and have a Canadian
"Tax agent" who may or not be the rental agent.
The NR-6 is available at:
http://www.ccra-adrc.gc.ca/E/pbg/tf/nr6/nr6-00e.pdf
This will result in the tax agent having to remit $25% of the net rent to
the Canadian Income Tax Department every month.
Then by March 31st of the following year, your tax agent has to file form
NR-4 and Summary to report the rental income to the CRA and you.
The flat form is at:
http://www.cra-arc.gc.ca/E/pbg/tf/nr4_flat/nr4flat-03b.pdf
The summary form is at
http://www.cra-arc.gc.ca/E/pbg/tf/nr4sum/nr4sum-fill-00b.pdf
Then by June 30th, you have to file a Canadian Tax return under Section
216(4) to report the rental income to Canada on form T776
http://www.cra-arc.gc.ca/E/pbg/tf/t776/t776-fill-01e.pdf
You can read the T-1 Guide at
http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-03e.pdf
The T776 will give you a good idea of what is deductible -- It is analogous
to the US form 1040 with a schedule E.
You can also go to www.centa.com and read the rental income section in the
Tax Guide - look around a bit.
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