Now more than ever Canadians are looking to purchase U.S. real estate in the south for the winter, and there are more reasons for this than you would think.
The first thought on most people’s minds would be warmer climates, but the truth is, they also want to invest in US real estate. This is because the Canadian dollar is in a good position right now in comparison to its US counterpart. However, don’t jump the gun and sign the dotted line just yet! There are some important differences in purchasing real estate in the US that you should be aware of.
The tax systems concerning U.S. real estate are different from those in Canada.
One thing to consider is that although US property taxes are similar to Canadian property taxes, you may have to pay a little more for your US estate. This is because you are considered a non-resident. These extra taxes imposed can amount to quite a bit. The good news is that any of the interest charged on your home can be written off of your US taxes.
Should you decide to sell your home there are some considerations as well. Selling investment property in Canada can cost you 50% of your profit because of the capital gains tax. In the US however your total taxation for investment gains is only 15%. This is much preferable to Canadian taxes. The US will also defer the taxation for up to 180 days if the money is used on a similar investment property. This can be done as many times as needed as long as the money is always reinvested. Canada does not have the rollover option available at this time. This deferment is great should you choose to take the money earned on one investment and apply it to another.
Before investing in US real estate is sure to check the nonresident taxes that you may be subject to. These can vary from location to location. You will also have to pay US taxes on the home you are purchasing. You will, however, be able to get this tax credited back in the form of a credit on your Canadian tax return.
Right now the conditions are favorable for investing in U.S. real estate.
This is because the Canadian economy is healthy. Workers are being paid good wages for a day’s labor and the unemployment rate is at a low. This is in contrast to the current US recession. The Canadian dollar is currently strong against the US dollar, allowing Canadians who wish to invest in U.S. real estate to have the upper hand.
In order to take this advantage, it is important to make your investment now. Before making your decision, you may want to consider speaking with a real estate agent or investor who is familiar with U.S. real estate law. This can be beneficial and help you to avoid any unexpected issues that may arise. Keep these important things in mind when you decide to invest in U.S. real estate.