Tax Tip 5 of 32, U.S. tax return
U.S. Rental Income
With U.S. housing prices in decline, many Canadians have purchased property in the United States.
Unless you as the investor are a U.S. citizen or resident, your tenants will have to withhold a hefty 30 per cent of the gross rents and send it to the Internal Revenue Service (IRS). This will be the amount required to cover the U.S. tax owing on your rental income, with no deductions.
But as Chartered Accountant Mark Feigenbaum in Thornhill explains: “If you make a ‘net rental election’ on a U.S. tax return, then your tenant will not have to withhold from the rents.”
Feigenbaum, who is also a U.S. Attorney and Certified Public Accountant, continues, “You will only be required to pay tax on the rental income after taking into account any deductions, and be taxed at graduated rates – not the flat 30 per cent rate.”
Brought to you by the Institute of Chartered Accountants of Ontario.
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The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario’s 33,000 Chartered Accountants and 5,000 CA students. Since 1879, the Institute has protected the public interest through the CA profession’s high standards of qualification and the enforcement of its rules of professional conduct. The Institute works in partnership with the other provincial Institutes of Chartered Accountants and the Canadian Institute of Chartered Accountants to provide national standards and programs that are used as examples around the world. </em>
