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The Tax Obligations of Owning a Home in the United States

[fa icon="calendar"] Jul 24, 2019 11:00:00 AM / by Allen Koroll

Broker giving the keys to a home

Did you know that snowbirds account for 19% of foreign home purchases in the United States? Or that in 2017, snowbirds purchased over $7 billion USD in real estate? 

While it is great that so many Canadians are able to afford property away from Canada, it is important to remember that there are potential tax implications that could come into play as a result of you owning a vacation home in the United States.

To clarify, the owning of vacation property does not create any tax liabilities in the United States, but what is done with the property after you buy it may.

Using it as a rental property

If you rent out your vacation property, you will be incurring rental income or loss. As a result, you will have to file a tax return reporting this financial information. Doing so will preserve deductions on that rental property which can be claimed at a later date if you sell it.

Selling your property

If you sell your vacation property, the sale itself must be reported. While you may incur a US withholding tax when you file your return, this can be claimed as a payment against your final US tax owing.

As a Canadian resident, you will also be required to report the sale of your US property on your Canadian income tax return. To avoid being double taxed on the same income, you will be able to reduce your tax owing, in Canada, by the amount paid to US tax authorities.

If you pass away

In addition to income tax liabilities, if you pass away and your home in the United States is still in your name, you can open your estate up to estate tax liabilities.

US estate tax rates range from 18-40% depending on the fair market value of your assets (fewer liabilities) at the time of your death.

For more information on the tax liabilities associated with owning a vacation property in the United States, please contact us today.

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The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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At Koroll & Company we grow our firm through satisfied clients referring us as a trusted accounting firm to their friends, family members and associates. The only way we know how to achieve this is strive to exceed your expectations and provide you with exceptional service. We have 20+ years servicing Newmarket, ON and the surrounding areas, and look forward to servicing you next. So give us a call and speak to a friendly staff member from Koroll & Company today!

Topics: Real Estate

Allen Koroll

Written by Allen Koroll