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Canadian Selling U.S. Real Estate

As a Canadian owner of U.S. real estate, you will want to know all the tax consequences and the best tax scenarios of selling your U.S. property. As you probably already know, the American tax laws on selling property are similar to Canada, although they can seem slightly more complicated, especially if you are not regularly involved in real estate transactions in the United States. 

Here is some income tax information to guide you. It would be best to read this before you put your home on the market, though it can help you in whatever stage you are at with selling your house or condo in the U.S.



1. Determine your U.S. Residency Status

You will need to determine your residency status as tax implications will be different depending on if you are a resident or non-resident.

2. 10% of the gross sales price might be withheld

You will have 10% of the Gross sales price withheld by the IRS or 35% of the net gain as a non resident. You can apply to reduce or eliminate that. Find out more.

3. State Tax might be withheld

Some states have non resident withholding tax on the sale of real estate, this is different than the federal withholding because you may still be a U.S. resident and have taxes withheld if the property is in a different state than the one you reside in.

4. Buyer Submits Forms 8288, 8288-A, W-7's, the IRS Sends you a Stamped Copy

Once the escrow has closed on your real property, the IRS will review your form 8288-A and send you a stamped copy "b" that you will need to keep in order to apply to recover the withheld income tax.

5. File a 1040NR to Recover Withheld Taxes

You will need to file a 1040NR which is the income tax return for non residents of the United States. Please read what will need to be done in this process.


Canadians selling U.S. real estate is typically a once or twice a lifetime event and will need the help of some professional expertise. It is always best to contact a U.S./Canada income tax preparer in any situation involving withholding tax. Contact Borders Bookkeeping and Income Tax Preparation today.

 

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