How to Buy Real Estate Property in Canada: Tips for U.S. Residents

Canada and the US are two bordering countries and while being very similar in general, each has its own beauty and character. This is why having a piece of property on both sides of the border can be a smart decision to make. But in this case you need to ensure in your proper actions because condo legislation differs a lot, and so do tax regulations.

We can get into Canadian Condominium Act deeper and try to get to the core of the issue, but we will try to avoid any complicated terms and give an example.

We have a couple Jane and Michael, both have Canadian citizenship and Michael also have US citizenship. They live in Canada. They bought a house in Vancouver and later Jane checked condo listings to buy one in Arizona. At this point the family owes some US tax in case of reselling the house or the condo. Under Canadian tax rules and regulations, their principal residence sale is free of capital gains tax; but under American the situation is different. Michael is subject to both US and Canadian tax rules due to double citizenship.

Let’s say that the house was bought for $250,000 and now is worth $2,25 million. So in the situation we have, the house gain would be $2 million ($2,25 mln - $250,000). The surprising part is that under the US legislation the couple is obliged to pay 23.8% from $750,000 of capital gain after the exclusion of $250,000. Now the surprise is that under Canadian regulations the sale of their principal residence is tax free, but in the US they have to pay the tax anyway.

Anthony Sparks is established as a content developer for a range of real estate law publications, who writes about different legal subjects and areas alike.

If you are interested in the way out of such situation and other issues with real estate law in the US and Canada, please read this story.

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