U.S. Rental Returns

There has been a large increase in the number of Canadians purchasing U.S. rental properties.

It’s critical that non-resident investors ensure compliance with U.S. tax laws and minimizing their overall tax burden.

There are several key rules surrounding U.S rental properties that investors should keep in mind:

  • If you are receiving rental income from real property situated in the U.S., you are subject to a non-resident withholding tax of 30% of the gross rental income.
  • Your withholding agent or tenant is required to report the amount of gross rental income and the amount of non-resident tax withheld to the I.R.S.
  • You may elect to file a U.S. tax return and pay tax on the net rental income at their graduated rates. The rental return must be filed in a timely manner in order for the election to be valid. You will need a U.S. tax identification number (ITIN) in order file a U.S. tax return.
  • You may eliminate non-resident tax withholding at source by advising your tenant that you have elected to file a U.S. tax return and by providing them with Form W-8ECI. You will need a U.S. tax identification number (ITIN) in order to take advantage of this.
  • If you do not file the tax return in a timely manner, the IRS may disallow all deductible expenses and any related loss carryovers. In addition, there may be penalties for late filing and underpayment of tax.

We can provide the following services:

  • Preparation of your U.S. Federal rental return including any required state returns
  • Managing the Taxpayer Identification Number application process
  • Preparing W-8ECI forms if required
  • Ensuring your U.S. rental property activity is properly included on your Canadian tax return and available credits are taken.