buying a rental house in california

[damon888]

ive spent quite some time doing dd on this site .its been very helpfull .but still have some un answered questions.im wanting to find more info on buying a rental house in california.i want to use it as a vaction rental,and for myself when i go down there to vaction.i think i have the mortgage info figured out.but wanting to know more info about property taxes,do i pay in the us or canada,do i claim the money i get from renting it out.just trying to find as much info as i can before i do this.should i talk to an accountant.sorry for the long post.any help would be great.thnx damon

[Steven]

You pay the property taxes to the local tax authority where the property is located.

Rental income is subject to US income taxes. You have to file a 1040NR and pay them. Then you claim a foreign tax credit in Canada when you file your T1.

Read this: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

It's a bit out-of-date now as the 2008 tax treaty basically forces you to declare the income as "effectively connected with a US trade or business" but why on Earth anyone wouldn't have done that anyway I've never been clear on, as it explains in that publication.

You have to pay California State income taxes as well.