Cross Border Tax issue when renting primary residence in canada.

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2852 viewsJanuary 25, 2017

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Anonymous Posted January 24, 2017

I am planning on moving to the U.S. for a 5 year period using a non-immigrant visa. I have a primary residence in the NRC. Real-estate market is a bit slow this time of the year around the NRC and I am evaluating sell vs rent options and wanted to understand the tax implications.

If I rent my property now and if I sell it later, would I be double taxed both in the US and Canada? Would I be taxed only on the capital gains since renting or on the gross price? I bought my property in 2012 and USD to CAD conversion was good back then. For US tax purpose when there is a need to put the value of my house would I use the 2012 conversion rate or current conversion rate?

Thank you,
A.

1 Answer

score 0 · Answer 1 · 2017-01-26T15:12:02+00:00

I’m not sure where the NRC is located. So I will answer your question based on the assumption that the location is in Canada.

As a non-resident of Canada, if you rent out a rental property in Canada, you must remit a withholding tax equal to 25% of the gross monthly rents collected to the Canada Revenue Agency (CRA). You can recover this tax by filing a Section 216 Non-Resident Return with the CRA.

If you sell a Canadian rental property as a non-resident of Canada, then the buyer’s lawyer must withhold a tax equal to 25% of the selling price. This tax can be recovered by filing an “Application for a Certificate of Compliance” with the CRA. In addition, a Section 116 Non-Resident Return must be filed with the CRA to report the sale.

When you move to the US, you should file an election with your US return to bump-up the cost basis of your Canadian assets to fair market value on the date of immigration. This way you will not be double taxed.

Cross Border Tax issue when renting primary residence in canada.

1 Answer

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