The purchase of Canadian property by investors in Asia and other parts of the world has been a much-discussed topic in recent years. However, many Canadians are also involved in the oft-discussed foreign real estate investment. Residents of Alberta who have purchased residential real estate in the United States should take a close look at their purchases to ensure they are compliant with U.S. tax laws.
A critical report issued by the Treasury Inspector General for Tax Administration states that Internal Revenue Service (IRS) may be taking a close look at compliance with taxes from foreign owners of residential real estate in the country. The report also states that the agency will be looking into measures that will ensure non-resident property owners comply with its tax laws. The report was in response to an increase in offshore investment in American property, which increased an estimated $43.5 billion from March 2015 to March 2016.
Canadians often purchase property south of the border for the purpose of vacationing, particularly in the colder months. Many of those in Alberta and across the country who stay in their U.S. homes for part of the year attempt to rent them while they are not present. This rental income may be taxable in both the United States and Canada.
Whether residential real estate is owned in Canada, the United States or another country, understanding tax obligations is key for any homeowner. This can get complicated when renting a property and attempting to write off maintenance expenses as a landlord. Cross-border considerations can also present questions for property owners. Those seeking clarification or review of documents may wish to seek the council of an Alberta lawyer.
Source: Calgary Herald, "What Canadians need to know about the IRS' potential crackdown on foreign property owners", Jamie Golombek, Sept. 1, 2017