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Americans Selling Canadian Homes Face Tax Issues

August 13, 2015 By Cardinal Point Wealth

t-ritchie-americans-in-canada-selling-home
Canadian citizens are not subject to capital gains tax when they sell their principal residences. Americans selling their homes in Canada, unfortunately, may have to pay the tax.

As Terry Ritchie explains in this Globe and Mail video segment, Americans face the tax whether their home is in the United States or Canada. In most cases, they are entitled to a U$250,000 exemption—U$500,000 if married on the realized capital gains on their Canadian principal residence. However, home prices have appreciated sharply in areas like Toronto and Vancouver, meaning sellers may surpass the exemption amounts and face the 15% long-term gains tax.

What’s more, Americans could face additional taxes depending on the size of their overall world income. They include the 3.8% Obamacare surtax, which kicks in on income over U$125,000 for single or married separate filers or U$250,000 for couples. And if the gain is substantial enough to push their income beyond U$400,000 for single or married separate filers or U$450,000, the long term capital gain rate increases from 15% to 20%.

The IRS relies on home sellers to declare their gains and pay the proper tax. But be aware that Americans living abroad do have to declare assets under the Foreign Account Tax Compliance Act (FATCA). That means IRS auditors could require explanations about the source of certain assets.

 

Filed Under: Americans Living in Canada, Cross-border Tax Planning, Video Tagged With: Americans Selling Canadian Homes, Canadian principal residence, FACTA, Foreign Account Tax Compliance

FATCA Tax Evasion Law: What You Need to Know

July 20, 2015 By Cardinal Point Wealth

The Foreign Account Tax Compliance Act (FATCA) has now been in force for about a year now. Its goal: to prevent millions of U.S. taxpayers, and the global financial institutions that serve them, from evading U.S. tax on income and assets held outside the United States.

As our Terry Ritchie explains in an article at ADVISOR.CA, the law affects seven million Americans who live or work abroad, including 1 million in Canada. “U.S. persons” must file annual tax returns on worldwide income and disclose interests in accounts or other foreign entities outside of the United States. And under FATCA, non-U.S. financial institutions have to report certain information to IRS about U.S. persons’ bank, investment and other accounts.

The New York Times has documented examples of unfavorable treatment of U.S. persons by FFIs in Europe and elsewhere. But Canadian foreign financial institutions (FFIs) don’t appear to have turned away U.S. persons or closed their accounts due to concerns over FATCA.

FATCA still faces challenges, including a Canadian lawsuit charging that the cooperation agreement between that country and the United States violates the Canadian Charter of Rights. And in the United States, Congressional Republicans may look to repeal the law if a Republican succeeds Barack Obama as president.

But FATCA may also be applied on a global scale—in what’s being dubbed GATCA. The Organisation for Economic Co-operation and Development is promoting it as a way to curb tax evasion through automatic exchange of information between FFIs around the globe.

 

 

Filed Under: Articles, FATCA Tagged With: FACTA, Foreign Account Tax Compliance Act, Terry Ritchie

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“Cardinal Point” is the brand under which dedicated professionals within Cardinal Point Capital Management, ULC provide financial, tax and investment advisory, risk management, financial planning and tax services to selected clients. Cardinal Point Capital Management, ULC is a US registered investment advisor and a registered portfolio manager in Canada (ON, QC, MB, SK, NS, NB, AB, BC). Advisory services are only offered to clients or prospective clients where Cardinal Point and its representatives are properly registered or exempt from registration. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.