La Quinta, CA
(760) 895-3516

Tuesday, April 21, 2015

Determining U.S. Residency for Purpose of Selling Real Estate

Many Canadian snowbirds have enjoyed buying properties in California, Arizona, Florida, and Nevada to use as rental properties or vacation homes. If you are selling or will be selling U.S. real estate as a Canadian, you will first want to determine your residency as far as Canada and the U.S. go.

Determining your U.S. Residency Status 

The first step is to determine your residency status in the U.S. as this will have tax implications for your U.S. sourced capital gains.  

Are you a U.S. Citizen, greencard holder, or the spouse of a U.S. resident whom you file a joint U.S. return with? If yes, you will be filing a regular 1040 U.S. income tax form. If not, the amount of time you spend in the U.S. will be taken into consideration.

  1. The Substantial Presence Test

    1. Did you spend more than 31 days in the U.S. during the given tax year? If yes, continue. If no, you will file a Non-Resident U.S. Income Tax form.
    2. You will figure the following formula to determine the days. If you are under 183 days, you do not meet the substantial presence test.

      183 day Formula: 
      1. 100% of the days spent in the U.S. in the current year (eg: 2015)
      2. 1/3 of the days spent in the U.S. in the previous year (eg: 2014)
      3. 1/6 of the days spent in the U.S. from two years ago (eg: 2013)
    3. Under the U.S. Canada income tax treaty, as a non U.S. citizen / greencard holder, you cannot claim residency in both countries. If the substantial presence test is met, a form 8840 Closer Connection Exemption Statement will need to be filed and the IRS will determine based on the information if you are a U.S. resident or not.

      If you become a resident of the U.S., you will need to file an exit T1, making you a non-resident of Canada. This is something you should think about long and hard if you have any assets in Canada (RRSP's, stocks, real estate, etc.) as there are tax implications
For any questions you may have when it comes to selling U.S. real estate as a Canadian, don't hesitate to give us a call. 

Borders Bookkeeping

(760) 895 3516

More Information on Canadians Selling U.S. Real Estate