US Condo and Rental Expenses
Subject: US Condo and Rental Expenses
Expert: [email protected]
Date: Saturday March 03, 2007
Time: 02:22 PM -0500
QUESTION:
We have a rental property in the US. Can I claim the property taxes paid on my condominium as a rental expense deduction on my Canadian taxes? Form T776 mentions only Canadian property taxes however, the general guide states that all expenses can be deducted.
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david ingram replies:
Anything that can be claimed on schedule E of the US return can be claimed on form T776
You need to do your Schedule E 1040NR first and then convert the US figures to the T776 on your Canadian return. If the condo is in Arizona, you would do a 140NR or if in Califormnia, a 540NR.
There is no state tax in Florida, Texas or Nevada, the other three popular places for a Canadian to have a rental US condo.
The difference between the two counties is the method of claiming depreciation. In the US, you MUST calculate thedepreciation and include it even if it creates a loss. The good news is that the operating loss caries forward as a future deduction agaisnt rent OR Capital Gains as opposed to non-resident losses in Canada which unfairly disappear into the ether.
In Canada, you do NOT have to claim it and if you do, can only claim enough to create a zero rental. Depreciation or CCA (capital cost allowance) as we call it can NOT be used to create or increase a loss.
Make sure that you do theUS returns, particularly if you are losing money. The penalty can be a minimum of $1,000 to $10,000 PLUS 30% of the gross rent for failure to file a US rental return by a non-resident.
We, of course, are ideally suited to look after these for you by fax, snail mail, email or courier.
Expert: [email protected]
Date: Saturday March 03, 2007
Time: 02:22 PM -0500
QUESTION:
We have a rental property in the US. Can I claim the property taxes paid on my condominium as a rental expense deduction on my Canadian taxes? Form T776 mentions only Canadian property taxes however, the general guide states that all expenses can be deducted.
--------------------------------
david ingram replies:
Anything that can be claimed on schedule E of the US return can be claimed on form T776
You need to do your Schedule E 1040NR first and then convert the US figures to the T776 on your Canadian return. If the condo is in Arizona, you would do a 140NR or if in Califormnia, a 540NR.
There is no state tax in Florida, Texas or Nevada, the other three popular places for a Canadian to have a rental US condo.
The difference between the two counties is the method of claiming depreciation. In the US, you MUST calculate thedepreciation and include it even if it creates a loss. The good news is that the operating loss caries forward as a future deduction agaisnt rent OR Capital Gains as opposed to non-resident losses in Canada which unfairly disappear into the ether.
In Canada, you do NOT have to claim it and if you do, can only claim enough to create a zero rental. Depreciation or CCA (capital cost allowance) as we call it can NOT be used to create or increase a loss.
Make sure that you do theUS returns, particularly if you are losing money. The penalty can be a minimum of $1,000 to $10,000 PLUS 30% of the gross rent for failure to file a US rental return by a non-resident.
We, of course, are ideally suited to look after these for you by fax, snail mail, email or courier.
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