2 Misconceptions of Canadians Buying Real Estate in the United States

This is a guest post/article by Dale Walters who also published, Buying Real Estate in the US: The Concise Guide for Canadians.

There are a number of questions being asked of me, time after time, which tells me there is a lot of misinformation out there. Here are two of misconceptions I hear the most often.

1. If I report the rental (or capital gain) income on my Canadian return, I will not have to report the income on a US return. Conversely, if I report the income in the US, I will not have to report in Canada.

2. The US estate tax will impose a tax of 50% on all of my US assets.

Like myths and legends, misconceptions typically have some component of fact to them. I will discuss each of the three items and explain why each of them are wrong or misleading.

The first item appears logical because if the income was reported in both countries it would appear the there would be double tax. At the basic level of taxation theory, the country where the income is being earned should have a right to tax that income.

In this case the income is being eared in the US, therefore the US has the right to tax it. On the other side of the argumentis that countries in which you are a resident and/or citizen have the right to tax you. In this case, the investor is a resident of Canada and therefore Canada has the right to tax the income.You are saying, but wait, if both the US and Canada tax the income it will be double taxed and owning real estate in the US won’t be such a good investment.

Continue reading the article.