Cross-Border Savvy needed when buying in U.S.
Cross-border savvy needed when buying in U.S.
BY ALEX FRAZER-HARRISON, FOR THE CALGARY HERALDJULY 14, 2011
By doing your research and accessing expert advice, your home purchase in the U.S. should be stress-free. Buying a home can be nerve-wracking at the best of times. Imagine buying a second property outside Canada.
Doing research and accessing the right people, however, can take some of the stress out of it. Just ask Calgary realtor Tanya Eklund, who three years ago took the plunge and bought a second home in Scottsdale, Ariz. “The process was similar to up here; we had an offer to purchase, and there were some conditions; the biggest thing was having a U.S. (bank) account,” says Eklund, with Re/Max Real Estate Central. “You have to fill out certain tax forms, because it’s still an investment. We had to set up a U.S. account, and you have to make sure you transfer into that account.”
She also suggests dealing with an accountant with cross-border experience.
James Meadow, who specializes in international taxation services with MNP, says tax implications depend on what you plan to do with a foreign property.
“Where it’s a vacation property for personal use, in that case, there shouldn’t be income-tax implications before the property is ultimately sold,” he says. “It could be held directly by one person, or jointly by a couple. If you want to have a number of people involved, it’s better to use a trust.
“The way in which (the property) is held could have significance with respect to the U.S. estate tax if one of the owners dies while the property is being held. I find people buying a vacation home for a couple hundred thousand dollars won’t warrant estate-tax worry.”
Meadow stresses Canadian buyers/sellers need to keep foreign exchange rates in mind when doing cross-border transactions.
As for rentals: “Once you start to rent, you would want to file U.S. tax returns annually. If you don’t, there should be a withholding tax. When you do the returns, the rental activity (is treated) similar to the way it’s reported in Canada.”
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