Tips for Canada-US Cross-Border Tax


If you are a Canadian resident, but living or working in US or have US rental property:

  • Avoid becoming a US resident while visiting
  • If you own rental real estate in the U.S., elect the net rental income     method
  • Beware of high effective tax rates when considering an investment in a U.S. limited liability corporation
  • Sell real estate to a buyer who will occupy it as a residence
  • Apply for a U.S. “withholding certificate” on the sale of real estate
  • Be cautious when acquiring share in U.S. corporations
  • Leave property to your spouse or a qualified domestic trust
  • Mortgage property (non-recourse) to reduce the value of your U.S. real estate
  • Acquire property jointly with your spouse or another person
  • Split your worldwide assets with your spouse
  • Consider a split interest purchase with your child
  • Hold your U.S. property through a Canada corporation
  • Hold your U.S. assets through a Canada partnership that elects to be treated as a corporation in the U.S.
  • Sell U.S. property before death
  • Consider taking out life insurance to cover U.S. estate taxes

If you are a US resident, but living or working in Canada or have Canadian rental property:

  • Consider claiming the foreign earned income exclusion
  • Claim the maximum foreign tax credit
  • Keep records of expenses deductible on your U.S. return
  • Beware of differences between Canadian and U.S. rules governing retirement income
  • Elect to defer U.S. taxation of income accruing in your RRSP and other Canadian retirement plans
  • Beware of non-qualified deferred compensation plans
  • Watch our for ownership of Canadian corporations earning passive income
  • Be cautious of using the Cdn$750,000 capital gains exemption
  • Review income splitting arrangements to prevent double taxation
  • If you are married, file a joint return where appropriate
  • Consider using the annual $12,000 U.S. gift tax exclusion to transfer wealth to children and grandchildren
  • Beware of U.S. gift and foreign trust reporting rules
  • Consider expatriating from the U.S. to protect your Canadian assets from U.S. tax
  • Watch our for short-term visits to the U.S. following expatriation
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