What Foreign Nationals need to know about buying in Palm Springs
Canadian, French and other foreign nationals have been enjoying the Palm Springs and Coachella Valley market for years, as both a sunny vacation getaway and as a smart investment opportunity. With a decade of local experience, you can count on us to expertly guide you through the process. Pour vous aider, on parle francais!
- We’re residential neighborhood experts and can help you find the perfect neighborhood that suits your specific needs.
- We’ll help you understand financing options by connecting you to lenders who have experience working with foreign nationals.
- We will recommend experts to help you navigate US property taxes and other particulars associated with owning US property.
- If you’re looking to earn income from your investment, we will connect you with trusted property/rental management companies.
Owning Property in the US
Please note, this discussion is intended to give you a basic overview of tax considerations when purchasing in the US and is provided for informational purposes only. It is not intended as tax advice or legal advice. Please consult with your tax advisor, financial advisor and legal counsel for details specific to your circumstances.
According to one well-known international tax expert, buying and owning US real estate is no more complex that purchasing and owning in your own province — as long as you follow all the income tax rules involved.
Understanding taxes is key
It’s not the properties, but legal and tax differences between the two countries, and variations between states, that add complexity. The solution? David Ingram, Principal of Vancouver-based CEN-TA Services, suggests you search out a Canadian income tax advisor, experienced in dealing with US taxes, before you locate the US property of your dreams. US tax advisors know their own federal and state tax issues, but Ingram says they are rarely familiar with the complexities of Canadian income tax law because, with a population 10 per cent of that in the US, Canada’s tax issues are not mainstream knowledge in the US.
“Ask what forms should be used,” said Ingram suggesting one way to determine whether an accountant or other tax advisor has hands-on practical experience filing US returns. Ingram is not a chartered accountant, but graduated from the University of British Columbia’s Urban Land Economics program and claims 43 years experience with tax, real estate and immigration issues, much of it in the public eye through the media, his books and the Internet. He stresses the importance of settling on a tax advisor early on, but does not believe that the choice of state or property should be based on tax laws since filing rules change each year for federal, state and provincial tax. Whether considering a snowbird vacation condo or accepting a job transfer to the States, cross-border buyers typically seek out professional advice for the actual purchase and move, but ignore tax and estate planning until tax time or a crisis. That after-the-fact approach removes the opportunity for overall estate planning and tax minimization.
Ingram offers these tips and suggestions for Canadian considering US real estate ownership:
- If you rent out your US real estate, then the rental income must be reported on a federal and any state return required. Some states, like California, require state income tax. Others, like Nevada, do not. Failure to file may carry penalties as much as 30 percent of the gross income, with no expenses or deductions allowed. In the US, tax schedules are used to calculate depreciation, an allowable expense on income properties. On Canadian returns, the capital cost allowance schedule covers depreciation.
- Marital status and who owns the US property is important, too. If both spouses are on title, then both must file federal and state returns.
- Canadians who rent in Canada may be entitled to a capital gains exemption if they designate their US property as principal residence. This would make any profit earned when the real estate is sold exempt from Canadian, but not US, tax.
- Province of residence is an issue too. In Ontario, 153 days of residency should qualify you for OHIP, but in other provinces, more than 183 days are necessary for coverage by the provincial health plan.
- Canadians paying US tax may claim foreign tax credit federally and provincially.
- Researching government resources and requirements is also highly advised.
- Keep up to date on changes in US Entry Requirements through the federal Canada Border Services Agency; The Canada Revenue Agency (CRA) taxes your US income, except US lottery or gambling winnings. The CRA includes suggestions in its report “Canadian Residents Going Down South” for Canadians who spend part of the year in the US and still maintain residential ties in Canada.
Two books books to help get you started:
The Canadian Snowbird in America by Terry F. Ritchie.
The Border Guide – A Guide to Living, Working and Investing Across the Border by Robert Keats.
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