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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 Goes Live

July 1, 2014 By Cardinal Point Wealth

For more than two years, we’ve been covering the implementation of the Foreign Account Tax Compliance Act (FATCA) and all its implications. Well, the big day has arrived! FATCA takes effect on July 1st (on Canada Day, interestingly enough), and we’re catching you up on the good, the bad and the ugly by highlighting key coverage from our Press Room. We’re also waiting with bated breath to see how it all plays out…

In a nutshell, FATCA is the result of U.S. legislation designed to derail tax evasion by U.S. citizens and residents abroad and the international banking institutions in which they hold money. The Act is also intended to generate significant revenue by ensuring that the roughly 7 million Americans who live or work abroad become tax compliant with the Internal Revenue Service (IRS).

Without delay, here’s a roundup of everything you wanted to know about FATCA (but were afraid to ask):

  • “FATCA—Forget About Trusting Canada Again?” includes some of my most recent (and candid) thoughts on the subject. This article discusses whether Canada had a choice in complying with the Act, the impact on clients, and how advisors can best guide their clients.
  • Just in time for FATCA’s implementation, the I.R.S has launched a revised tax amnesty program that benefits Americans living in Canada.
  • In our News to Note section, we highlighted this piece on the logistical nightmare that is FATCA compliance.
  • One result of FATCA is that there are new rules for U.S. taxpayers holding mutual funds outside registered accounts. In this article, we look at the necessary forms to file and the consequences of this new rule.
  • In this video clip, I give Globe and Mail’s Rob Carrick an update on the FATCA-related IRS crackdown on Americans who live and work in Canada but haven’t been filing their annual tax returns.
  • In this article, my colleague John McCord discusses the importance of disclosing foreign-based accounts to the IRS if you’re an American expat—and how FATCA is behind it.

 If you have questions or concerns about FATCA and its potential impact on you, the cross-border specialists at Cardinal Point Wealth Management are here to help.

Filed Under: Americans Living in Canada, Articles, Canada-U.S. Financial Planning Articles, Cross-border Tax Planning, FATCA Tagged With: Americans living in Canada, Canada-U.S. financial planning, Cross-border tax planning, FATCA, Foreign Account Tax Compliance

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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.