How to claim U.S. rental income
Claiming income from a U.S. rental property could work in your favour.
MoneySense at the MoneyShow: Capital gains and ETF sessions
Here’s how to get your free ticket to attend two MoneyShow virtual expos.
Q: We purchased a condo in Florida and plan to rent it out for two or more weeks a year until we retire in 10 years. Do we have to file a U.S. tax return? If so, what deductions can we claim?
—Ursula and Joe B., Pickering , Ont.
A: You aren’t required to file a U.S. tax return. But like wearing sunscreen on the beach in Sarasota, it could be in your best interest. Filing a return may help you get some withholding tax back, says Dean Paley, an accountant and financial planner in Burlington, Ont. “Gross rents are subject to a 30% U.S. withholding tax,” he explains. “Your tenants are required to withhold and remit this tax regardless of their nationality.”
You can claim expenses such as property taxes, condo and management fees, utilities and interest—pretty much all the things rental property owners can claim here. In addition, the U.S. provides a mandatory deduction for depreciation. So while you’ll be taxed on the remaining income, Paley says, “if the tax calculated is less than the amount withheld, you will get a refund.”
If, for some reason, your tenants do not withhold and remit the tax, you have no choice but to file a U.S. return. Once you file that first tax return, you will be required to file a 1040NR in all future years for as long as you own that property.
Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal question? Write to Bruce at [email protected].
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Related Articles
Looking for a mortgage in B.C.? Don’t limit your options to the big banks
Sponsored By
Coast Capital
Canadian Financial Summit 2024: MoneySense sessions and free tickets
Created By
Canadian Financial Summit
I want to switch mortgage lenders—do I have to pass the stress test again?
If you have an uninsured mortgage, it’s about to get easier to look for better interest rates elsewhere.
The tax implications of buying a second home in Canada
Vacation or rental property, or both? Here are the taxes you can expect on a secondary property in Canada,...
How to use equity to buy a second home
We look at four common ways of financing the purchase of a second property using equity built up in...
Down payment for a second home in Canada: How much do you need?
Second homes and rental properties have their own down payment requirements. Here’s what to expect when buying a second...
Second mortgages in Canada: What are the rules?
Interested in buying a second property? Familiarize yourself with the mortgage rules first to make sure it’s the right...
Buying a second home: How it works in Canada
Here’s what home owners and investors should know about the rules, financing options and tax implications of buying a...