You should consult with your professional advisor prior to implementing any strategy or plan outlined below.
- Corporate restructuring
- Succession planning
- Estate & testamentary trust planning
- Farm transfers
- Professional corporations
- Assistance with Canada Revenue Agency
- Individual/corporate tax planning
- Individual pension plans
- Private health services plans
- Scientific research & experimental development tax credits
- Combined Federal & Ontario Corporate rates
- Combined Federal & Ontario top marginal personal tax rates
- Rental of U.S. real estate
- Sale of U.S. real estate
- U.S. Federal Estate Tax
- U.S. Gift Tax
- U.S. gambling winnings
- Canadian estate freeze for U.S. persons
- Filing due dates for U.S. returns
- Investing in the U.S.
- Revised Streamlined Procedure
Canadians who intend to rent their vacation home or secondary residence situated in the U.S. are subject to a U.S. withholding tax of 30% on the gross rental. The agent who collects the rent is responsible to remit the tax to the IRS.
Canadians should keep in mind that the sale of any U.S. real property interest will not only attract Canadian tax, but U.S. as well. Canada will generally give you a foreign tax credit for any federal and state tax.
The American Taxpayer Relief Act passed on January 1, 2013, increases the top rate to 40% from 35%. Currenty, the exclusion is $5.34M (which is the 2014 inflation-adjusted $5M exclusion). The Act also repeals the 5% surtax on estates over $10M; permanently extends portability of one spouse’s unused $5M inflation-adjusted exclusion to the surviving spouse and extends the deduction for State estate tax in arriving at the taxable estate.
Gifts made by Canadian donors of a present interest in U.S. situs tangible property and real estate are subject to the gift tax. Exemptions available to Canadians are significantly lower than what is available to U.S. citizens.
Canadians who wish to reside in the U.S. for the winter months should be aware of the U.S. residency rules. If you fall into these rules, you could be subject to U.S. tax on your world income unless you file the appropriate forms for exemptions.
U.S. citizens, resident aliens and green card holders are subject to U.S. tax on their gambling winnings.
Canadians who do not fall into this category are subject to a 30% withholding tax on winnings. Games such as blackjack baccarat, craps, roulette or Big 6 wheel winnings are not subject to the 30% non-resident withholding tax.
There are many U.S. persons who are residents of Canada that own Canadian- controlled private corporations. Corporate restructuring involving asset transfer including shares and/or share exchanges that are tax-deferred for Canadian income tax purposes may not deferred for U.S. tax law.
U.S. corporations file IRS Form 1120; foreign corporations (Canadian corporations) file IRS Form 1120F.
Corporations that have a fixed base in the U.S. must file by the 15th of the 3rd month. This applies to U.S. corporations and Canadian corporations carrying on business in the U.S., generally as a branch operation.
Even with some economic recovery, the landscape in the U.S. has made it very attractive for Canadians to purchase vacation or rental properties in the warmer climates. Interest has increased as result of lower pricing as well as the stronger Canadian currency with anticipation of realizing significant capital gains when the market fully recovers.
U.S. persons including U.S. citizens or green card holders residing in Canada who are not up to date with their U.S. filing obligations should consider the available programs in an effort to become tax-compliant.
The updated streamlined procedures announced on June 18, 2014 modified changes to the 2012 streamlined program, now known as the Streamlined Foreign Offshore Program (“SFOP”) requiring the filing of 3 years of past-due returns (with required disclosures and international information returns) plus 6 years of FBARs.