What you need to know about Taxes if you are a Canadian buying a rental property in United States

If you are Canadian buying a rental property you will have to pay income taxes in United States. If you don’t submit your taxes, IRS will automatically take 30% of your gross rental income, and this is a very expensive way to pay taxes, because it will be based on your gross income and you won’t be able to deduct any expenses like depreciation, home insurance, repairs, or interest. You can avoid this high tax implications if you will apply for an individual tax number ITIN. This will allow you to pay taxes based on your net income and you will be able to deduct your property expenses.

Now, when you will file your Canadian taxes you will also have to report you US states income, that may sound like double taxation but it is not because you  will claim foreign tax credit for the American taxes which you already paid and your Canadian taxes will be reduced.

Doing your taxes may end up more complicated than it sounds, I always advise my clients to hire an accountant or a cross border tax professional who will help you submit your taxes in both countries.

I hope that gave you an idea of how it’s all going to work when you will be buying a property in United States.  

If you have any questions please feel free to contact me, I will be happy to help.