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

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Updated on February 19, 2024

Do you own or rent real estate in the United States? Are you aware of your tax liabilities? Here are the answers to the FAQs asked to our American tax experts on this topic.

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

A: 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.

Q: 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?

A: 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 that the property owner register in order to file and remit the development tax directly to the county.

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

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

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

A: 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.

Q: 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?

A: 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.

Q: When a US return has to be filed, is it necessary to have an ITIN tax number?

Anyone filing a US 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.

Do you have questions relating to U.S. tax issues? Our tax experts can help you.

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