US born Citizen living in Canada - Tax Advice

[Brian Thomason]

Hello, I am currently living in B.C. Canada and looking into buying my first home. I was recently told that it is a bad idea for US born citizens to invest in Canada. From the limited info I gathered, the only thing that the IRS will not want to get their hands on is an RRSP account (Registered Retirement Savings Plan) and a primary residence. Other than that, it seems the IRS will want to tax me on any mutual funds,rental properties etc.

Is this accurate?

I am interested in buying a duplex and renting out part of it to help with the mortgage payments. Will this be considered income and get taxed by the IRS in the US as well as taxed here in Canada?

What about if I decide to sell the home down the line, will I be taxed by both the US and Canada?

Thanks in advance for any help and information on this.

[Eamonn McElroy]

As a US citizen, the general rule is that you are taxed on your worldwide income.  If you are a resident of a foreign country, and a tax treaty is in place between the US and your country of residence, the treaty may override the general rule.

Sec 121 excludes some or all gain on a principal residence if certain ownership and use requirements are met.  Foreign principal residences qualify.

You should retain a US tax professional.  Living abroad significantly complicates your tax situation.  You may have exposure to some esoteric filing obligations which include FBAR, 8938, 8858, etc.  The penalties for failure-to-file these forms aren't cheap.  You'll also want a professional that understands when it's appropriate to use the Foreign Earned Income Exclusion and when it's not.  Best of luck.

[Brian Thomason]

Originally posted by @Eamonn McElroy:

As a US citizen, the general rule is that you are taxed on your worldwide income.  If you are a resident of a foreign country, and a tax treaty is in place between the US and your country of residence, the treaty may override the general rule.

Sec 121 excludes some or all gain on a principal residence if certain ownership and use requirements are met.  Foreign principal residences qualify.

You should retain a US tax professional.  Living abroad significantly complicates your tax situation.  You may have exposure to some esoteric filing obligations which include FBAR, 8938, 8858, etc.  The penalties for failure-to-file these forms aren't cheap.  You'll also want a professional that understands when it's appropriate to use the Foreign Earned Income Exclusion and when it's not.  Best of luck.

 Thank you for the reply Eamonn. I will definitely be looking for a tax professional. I was told to look for a "Dual Citizen Tax Advisor" here in Canada. Do you think it would be a better idea to contact a U.S. Tax advisor instead? After I read your reply, it seems that might be a better decision than listening to the people here in Canada.

[Eamonn McElroy]

It's ultimately a personal decision, and you'll have to qualify the individuals you speak with to determine whether they'll be able to effectively help you and are familiar with situations similar to yours.