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A Checklist for Canadians Looking to Buy US Real Estate

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HeroicInvesting.comCanadian snowbirds have been flocking to the United States for years to escape the harshest months of winter, so it’s no surprise to us at Heroic Investing to learn that 1 out 5 Canadians is interested in buying US real estate and a full 23% of foreign property buyers in America are Canadian – this information provided courtesy of the International Business Times . ¬†As you probably could have guessed, there are a few things to keep in mind when buying foreign property. Canadians planning to make an American real estate purchase should pay attention to the following.

1. Is it an investment, vacation, or residence? This is a big question that needs to be addressed up front. If you spend more than 121 days per year in the United States, you are counted as a resident for tax purposes and might accidentally find yourself paying income tax in two countries. Talk to a qualified professional versed in both countries tax codes to avoid this issue.

2. Consider a property manager. If your American property is going to be rented or sit vacant part of the year, a property manager might be worth the expense. It all depends on the particular situation. Burglary and vandalism can be debilitating to resale value.

3. Non-resident alien status. If you do decide to rent your property out either part or all the year, you should be aware that the IRS will classify you as a “non-resident alien” and collect a 30% withholding tax on rental monies collected.

4. Taxed at sale. In some cases, a Canadian who decides to sell his US real estate leaves himself open to additional taxes of 10% on the gross sale. In some instances, such as if the sale is for less than $300,000 and the buyer plans to live in the home, the tax can be waived.

You should be starting to get the idea that a Canadian intending to buy US real estate needs to understand both sides of the equation (Canadian and American) tax law before proceeding. But don’t let this dissuade you. With American real estate having dropped 30% over the past few years and the Canadian dollar riding high, don’t be afraid to pull the trigger on what could be a lucrative deal.

Anyone in the reading audience with personal experience about buying US real estate from a Canadian perspective? Please let us know about it.

The Heroic Investing Team

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