Canadians Buying & Selling Real Estate in the U.S.

Many people ask whether it is wise to buy Real Estate in the U.S. and there really is no straight answer to this question.  We’ve seen people buy and sell real estate in the U.S. recently and lose their shirt, while we’ve seen other people make a small fortune recently in U.S. real estate.  Just like in Canada there are many factors that affect the success of real estate transactions such as location, purchasing with a margin of safety, ensuring a thorough home inspection, having someone to take care of the property and the list goes on.  The real key in any real estate transaction is that you have to realize that you really make the return when you buy, not sell.  Buying the right property in the right location at the right time is really key!  Another question asked is whether people should buy the U.S. property personally or through a Corporation.  This question is different for each individual as everyone has a different situation when it comes to tax, liability and estate.  Keep in mind that the U.S. estate tax, which has been proposed to change recently can be a factor in making your real estate investment decision.  When buying, renting or selling properties in the U.S., you should know the basics on tax.  If you have income from property in the U.S. during a calendar year you must file a U.S. tax return.  If you do not have income from your U.S. property then you do not have to file a U.S. tax return.  You do not have to file an income tax return in the U.S. when you purchase U.S. property, however you must file one if you sell a U.S. property.  As mentioned in my prior blog when you sell a U.S. property they will take a withholding tax (typically 10-20%) on the gross proceeds of the sale.  To get this withholding tax back you must file a U.S. tax return and claim the U.S. tax paid as a credit on your Canadian tax return.  There are many considerations when dealing in the U.S. so please don’t hesitate to contact us for any questions.  We have a lot of knowledge and work closely with specialists in these areas.