Tax Implications for CANADIAN investing in US real estate

[Natasha Rooney]

Hello! 

I can't seem to find straight answers anywhere (totally could be looking in the wrong spots - I'm new to this!) 

What are the tax implications for a Canadian investing in US real estate? 

My husband and I are Canadian and hoping to start investing within the next few months in US real estate. We have done research about the whole investing piece, however, trying to find straight answers about how taxes work for Canadians investing across the border. 

Can someone with any experience with this please lay it out for us? 

Thank you in advance!! Looking forward to being part of this community! 

[Natasha Rooney]

Quote from @Account Closed:

Quote from @Natasha Rooney:

Quote from @Account Closed:

Hey Natasha! 

In general if you are what is called a resident alien, you are going to be taxed on your world wide income. 

You want to be sure your classified for what is called a non resident alien. Basically means you live in Canada, but you invest in the USA. A non-resident alien for tax purposes is a person who is not a U.S. citizen and who does not meet either the “green card” or the “substantial presence” test as described in IRS Publication 519, U.S. Tax Guide for Aliens. 

Non-resident aliens are taxed only on their income from sources within the U.S. and on certain income connected with the conduct of a trade or business in the U.S, leaving your CA income alone! I work with a lot of foreign folks who invest in multiple countries or live abroad. If you have any more questions feel free to reach out! 

Thanks so much for the reply! So registering as an 'alien resident' is definitely something that we will be doing. From your experience, do you know which legal structure is the best for Canadians investing in the US? LLC? C-corp? direct investor? etc?

Thank you! 

Depends on your deal! We want to have legal protection WHEN its applicable. For stock investments for instance, just invest directly. For partnerships, consider being a limited partner when you can. If your own real estate directly, a simple LLC will be more then enough to get started

Thanks for the reply!! 

This may be a dumb question but what do you suggest: LLC vs LP when investing alone (or with one other person, my spouse)?