We are pleased to share that David A. Altro was asked to prepare an article for SnowbirdAdvisor.ca, which was published in July 2018. The article titled “Tax & Legal Tips for Canadian Snowbirds Who Rent Our Their U.S. Property” reviews key topics for Canadians looking to rent out their U.S. real estate, such as rental income & taxes, insurance/personal injury liability, the rental agreement, and ownership structure. The article discusses the differences between US income tax and Canadian income tax, as well as reviewing ownership structures like Limited Partnerships and Trusts for the purpose of owning an income-generating property.
To read the article you can see it in part below, or click here to view it on the Snowbird Advisor website.
Tax & Legal Tips for Canadian Snowbirds Who Rent Out Their U.S. Property
David A. Altro
For Canadian snowbirds who own U.S. vacation properties, renting out those properties for some or most of the year can provide a nice revenue stream.
This extra income can help to pay down the purchase price of your property, cover other property expenses or contribute to your snowbird lifestyle.
However, renting out your U.S. property also comes with a number of tax, liability and legal matters that must be properly addressed, as failure to address these matters can lead to big headaches and even bigger financial liabilities.
Accordingly, snowbirds should always be aware of and deal with the following issues prior to renting out their U.S. vacation properties.
Rental Income & Taxes
U.S. Income Tax
Canadian snowbirds are tax residents of Canada; however, they must report U.S. rental income to the Internal Revenue Service (“IRS”) if they rent their property out for 15 days or more per tax year (if you rent your vacation property out for fewer than 15 days per tax year, then you don’t need to report your income to the IRS). Snowbirds must report rental income on IRS Form 1040NR.
Note that unless your cross-border savvy accountant makes a special election by filing IRS Form W-8ECI with your Form 1040NR, the IRS will levy withholding tax on your U.S. rental income. The withholding tax is 30% of the gross rental income. However, if you file for the special election, you only have to pay tax on your net rental income.