There are more and more Canadians who head to the United States during winter to escape the freezing weather, and invest in U.S. real estate.
Most of these Canadians purchase homes in popular states like Arizona, Miami and California. These places are popular because of the high number of foreclosures, short sales and homes owned by banks which result to very low prices. Here are some facts and tips for Canadians who are planning to own U.S. real estate:
1. Collecting rental income from s property in the United States requires filing a U.S. tax return. When looking to buy a property with the intention of leasing it out for the whole year (or a certain part of the year), it is important to choose the location wisely. Locations with desirable amenities like nearby malls, hospitals, shops, beaches, etc. are more likely to be leased. Make sure to personally check around the area before finalizing the purchase of a property in U.S. real estate.
2. When buying U.S. real estate, it is important to know the proper way of titling the property and the implications of the different kinds of ownership like joint with its survivorship, joint as tenants in common, fee simple, etc. Simply purchasing U.S. real estate doesn’t mean a U.S. tax return needs to be filed as this is only necessary when leasing it out or selling the property.
3. When it comes to financing a property in the U.S. real estate market, it is recommendable to secure financing with a U.S.-based financial institution. This ensures that they have a better knowledge and understanding of mortgage in the United States. However, if possible it is better to deal with one that is Canadian-owned for easier cross-border financing.
4. A recent change of the Canada-U.S. Tax Treaty prevents property owners from paying taxes in both countries. This overrides domestic U.S. and Canadian regulations and considerably lowers the overall tax bill of a Canadian who owns U.S. real estate.
5. Canadian retirees are offered portfolio opportunities to earn high tax-free interest income in the United States. This is a very attractive proposition since the cost of living in most retirement areas in Canada are substantially higher compared to those in the United States. This is why more and more Canadian retirees are moving to the United States. The strong Canadian dollar also adds to the very alluring proposition of living in the U.S.
6. To get the best rates when exchanging currency, it is advisable to exchange large sums at one time and ask for the spot rate if available. Using cash for the exchange should be avoided. It is also recommended to use reputable currency brokers because these institutions offer better rates compared to banks. Check at least three different institutions before finally deciding because most of these institutions have a wide rage of exchange rates.
7. A foreigner can only legally stay in the United States as a visitor for a certain number of days. If this number is exceeded, corresponding taxes may be required. If the stay will be more than 6 months and it will include any kind of work, a proper visa is necessary.