Episode 88: The Hidden Tax Shock: Selling Your US Property as a Canadian

If you bought a place in Arizona or Maui twenty years ago and never thought about what happens to it when you sell, or when you die, could it already be too late to avoid a tax shock you never saw coming?

This week Gerry sits down with Robert M. Clegg, JD, LL.M, of CanadAmerican Tax Services, a dual Canadian and US cross-border tax specialist based on Vancouver Island, to walk through what really happens when a Canadian sells US real estate. From FIRPTA withholding and ITIN requirements to the currency trap and the long road of selling a property after an owner has died, this is the conversation to have before you let a realtor put the sign on the lawn.

What You'll Learn in This Episode

- Why your first call should be to a cross-border accountant, not the realtor, and how that single move takes the hidden tax shock off the table before the sign ever goes up

- FIRPTA explained: how 10 to 15 percent of your gross sale price gets withheld up front, why California and Hawaii add their own layer on top, and why Arizona, Texas, and Nevada do not

- Why each non-resident Canadian spouse must file a separate 1040NR with their own ITIN, and how escrow companies routinely get this wrong by issuing one withholding slip under a single number

- The currency trap: how a weak Canadian dollar can turn a 700,000 US gain into a far bigger Canadian one, and why you need the exchange rate at purchase, at sale, and at every renovation

- How the foreign tax credit stops you from being taxed twice, why only half your gain is taxable in Canada, and roughly what is left to pay the CRA once the US tax is credited

- Why the 1031 like-kind exchange your realtor keeps recommending simply does not work for Canadians

- What changes when parents pass away still owning the property, from the US estate return on assets over 60,000 to a clearance certificate that can take two to three years before you can sell

Resources & Links

• Robert M. Clegg, JD, LL.M, CanadAmerican Tax Services: canadamericantax.com

• FIRPTA Canada, Calgary-based FIRPTA specialists: firptacanada.com

• Track your days across the border with DayTracker: snowbirdsusdaytracker.com

• Canadians Heading South - Buy the Book: https://a.co/d/01Ryf45Z

Note: the forms, thresholds, and rates discussed are general and reflect the conversation as recorded. Confirm your own situation with a cross-border tax professional and your Canadian accountant before selling.