Rental and Sale of United States Real Estate: Answers From Our Tax Experts

Frequently Asked Questions

• If I rent out real property located in the U.S. (condo/house), do I have to file a U.S. tax return?

  A non-resident of the U.S. who receives rental income from property located in the U.S. is technically subject to a U.S. withholding tax of 30% on the gross rental income. To avoid this holdback, the taxpayer must make an election to file a U.S. tax return and pay U.S. tax on the net rental income. The net rental income is also taxable in Canada. A foreign tax credit will be granted to avoid double taxation.

• If I rent out real property located in Florida for a period of six months or less continuously to the same tenant, do I have to collect the Florida sales tax?

  Yes, and you must remit it within the required deadlines. The Florida State tax is 6% plus any applicable discretionary sales tax (for example 1% for the Broward, Miami-Dade and Palm Beach counties).

  In addition, individual counties in Florida may impose a tax for tourism development in the region, in addition to the 6% state sales tax. Most counties require sales tax registration with the State of Florida to file and remit development tax directly to the county.

• What happens if I rent out my property on a short-term basis on a platform such as Airbnb or Vrbo?

  Before collecting taxes on short-term rentals from your tenants, it is essential that you check whether taxes have already been collected by the platform operator on your behalf. In certain U.S. States, the platform operator that processes the rental on behalf of the actual owner is required to collect sales tax and rental tax on the short-term rental.

  Furthermore, the platform operator may be required to remit any applicable taxes directly to the U.S State. In other situations, the platform operator must remit the taxes collected to the property owners who will then remit the taxes to the State’s tax authorities.

  Therefore, it’s very important that you verify the platform operator’s obligations regarding the collection and remittance of sales tax and rental tax in your jurisdiction.

• If I sell real estate located in the U.S., do I have to file a U.S. tax return?

  Yes, you do, in order to report the capital gain earned, and, if applicable, to pay U.S. tax on this gain.

• Must I also report this capital gain in my Canadian income tax return?

  Yes, it is also taxable in Canada for a Canadian tax resident. You will get a foreign tax credit for the U.S. tax paid on the capital gain. There is therefore no double taxation.

• I sold real estate in the U.S. and a 10% or 15% U.S. withholding tax was applied to the proceeds of sale. Is this right?

  Yest, it is. The sale of U.S. real estate by a non-resident is subject to a 10% or 15% withholding tax on the gross proceeds of sale under Foreign Investment in Real Property Tax Act rules. The buyer may not be required to deduct the withholding if both of the following conditions are satisfied:

  • • The property is sold for less than $300,000 US; and;

  • • The buyer intends to use the property for personal purposes.

• Is an ITIN required when filing a U.S. tax return?

  Anyone filing a U. S. tax return must apply for an ITIN (Individual Taxpayer Identification Number). This identification number, which is the equivalent of the social insurance number in Canada, is essential for filing tax returns in the United States. Read this article to find out more.