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Income Taxes on the Sale of U.S. Property in Canada

Maroof HS CPA Professional corporation is an IRS Certifying acceptance agent located conveniently in Greater Toronto Area in Canada. Further, cross border tax expertise help with the correct preparation of U.S. income tax returns. More info visit https://www.maroofhs.com/

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Income Taxes on the Sale of U.S. Property in Canada

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  1. Income Taxes on the Sale of U.S. Property in Canada https://www.maroofhs.com/post/cross-border-tax-issues-for-canadian-taxpayers-selling-us-property/

  2. Canadians love the warm weather of Florida and California. This is the reason lot of Canadians do own the properties in the U.S. If they are not living there, they are holding it for investment purposes. There are many income tax issues Canadians should b aware of while selling their U.S. properties. For a detailed information on the tax issues involved with sale of U.S. properties, read here. • Under Foreign Investment in Real Property Tax Act aka FIRTPA, the buyers are required to withhold 15% of the sale price and remit to IRS. There are exception involved, for more details refer to the link mentioned above. • A U.S. ITIN also known as US TIN or individual income tax number is needed whenever a US property is sold to ensure withholding taxes are credited to right account by the IRS. An ITIN is also needed when the seller want a reduced withholding rate. • Seller must file a U.S. federal tax return. For this purpose form 1040NR is used to report gain or loss. FIRTPA withholding is netted off with the final tax amount to calculate tax payable or a refund.

  3. • Correct preparation and submission of form W7 is critical in the whole process. Its important that you read all the instructions to avoid wastage of time and back and forth with IRS. If you find the instructions overwhelming use the services of a Certifying acceptance agent near you. Canadian notaries or lawyers cannot certify your documents. • The gain or loss is also reported to Canada Revenue Agency in Canada. The taxes paid in the U.S. become foreign tax credit so only the difference is paid. Foreign tax credit does not create a refund in Canada. So you pay the higher of taxes in US or Canada on property sale. • If you don’t file your tax returns in the U.S., you cannot get foreign tax credit in Canada even if you are having form 8288-A stamped by the IRS. Maroof HS CPA Professional corporation is an IRS Certifying acceptance agent located conveniently in Greater Toronto Area in Canada. Further, cross border tax expertise help with the correct preparation of U.S. income tax returns.

  4. You can reach us at: 3-100 Hanlan Road, Woodbridge, ON L4L 4V8 Phone: (647)724-4308 Email: Canada@MaroofHS.com https://www.maroofhs.com/contact/ https://twitter.com/MaroofHS https://www.facebook.com/MaroofHSCPA

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