Canadian resident- How to buy a home in USA?

[perkyj]

Little tax tip from Steve - *cough* vacation homes do not have to be declared to the CRA as foreign assets.

Does this mean that if I buy a home in Florida, I can just add my Canadian kids to the deed as joint tenants with rights of survivorship and leave it at that?

[keisha1103]

We did buy in Phoenix. Love it there. We still are flying down as we are not yet retired and want to make as much use of our time in AZ as possible. Once we do retire, it will actually be a lot easier as we then won't have to rent a car and can take a few days to drive down and back.

It is property that we have been scouting out for about 1 1/2 yrs so know they have not scrimped on the construction end (as far as we can see with the knowledge we have). In fact,they actually have not decreased their selling prices but added incentives - like upgrades and furniture/accessory packages. This is ideal for us as when we go down to take possession, all the furniture will be there. We opted out of the accessory package as I like to choose my own things so will spend a week there outfitting the place with dishes, linens, etc. to suit us. There were options for furniture/appliances and we think we had a good selection. They are a a great team of people to work with (so far) and we are definitely looking forward to finally getting to stay there. It is like a wonderful resort with all the amenities and more (we are timeshare owners so have been to many places and this tops most). They are there at your beck and call to help you in any way they can. Can hardly wait.

[Steven]

Does this mean that if I buy a home in Florida, I can just add my Canadian kids to the deed as joint tenants with rights of survivorship and leave it at that?

The reason I mentioned that was that it's a good way to hide your money from the CRA. For example if you have $150,000 and you earn bank interest on it, you have to declare the asset and the income to the CRA and pay income tax on it (and probably get a 1099-INT and do a 1040NR if the money is in the US).

If you've got a house in the US (or anywhere else for that matter), you don't have to declare anything, until you sell it, and you pay capital gains tax. It's unlikely the CGT is going to be as much as the income tax on another investment if you're in a high tax bracket.

Where people trip up is renting the house out, then you have to declare it all to the CRA.

But anyway, your question is a good one, and as far as I'm aware, assuming you and your kids are all resident in Canada for tax purposes that is pretty much it, your executor needs to declare it at probate but there's no estate tax in Canada.

The US end is more complicated, I'm not sure how joint tenancy affects the application of estate tax. Assets shared by spouses are not subject to the tax but they may be if they're shared with children. Your total estate (i.e. including assets outside the US) is figured in the application of the US estate tax but there are pretty generous exemptions for Canadians. I have to say I'm not terribly familiar with US estate tax provisions but I get the impression if your total estate is worth less than $1.2 million (USD) you're exempt anyway. The US does have a gift tax though as well.

The estate tax will actually be abolished in 2010, but there is a sunset provision in the Act. So basically if the Republicans get elected to control Congress (which is almost certainly not going to happen) there will be no estate tax after 2010. If you're going to die and you have large US assets, 2010 is the year to do it.

[slee]

We are Canadian and want to buy our daughter a house in San Francisco. She works there legally without a green card. Can we simply give her say 300,000 dollars? Also I have heard that it may be illegal for a foreigner to work on their own house there as its perceived as taking work away from Americans, would I not be able to work on her house for her? comments? Thanks

[Steven]

You probably can without incurring taxes. There is no gift tax in Canada, and under US law the gift tax is levied on the giver, not the receiver. As the giver is Canadian, there is no tax. However, her tax situation may play a part in it.

If she's in the US on a work permit of some description, and still is resident in Canada for tax purposes (i.e. she files a T1 and a 1040NR every year) then there is no problem, because essentially it's a transfer between two Canadian taxpayers. If she is no longer resident in Canada for tax purposes and her tax home is now the US (files a 1040 every year) it might get a bit more complicated, might be worth asking the IRS. Need to be careful that it doesn't get declared as income.

But I doubt it's a problem.

I suppose under a technical interpretation of the law, it may be illegal for you to work on someone's house because you are doing a job for nothing that someone would normally get paid for, so technically it's not a "volunteer" position and thus requires employment authorisation (bearing in mind even volunteer positions can require employment authorisation).

However if you're there on a B-2 doing some painting in your daughter's house, I find it hard to believe ICE are going to show up and deport you. De minimis non curat lex. "The law is not concerned with trifles."

[perkyj]

LOL, so can I tell my husband that I can't do any work around the house because I'm just a TD and not allowed to work in the US? I'm going to give it a shot right now, but somehow I don't think it's going to fly!

[Steven]

Has anyone bought insurance on a vacation home in the US lately? Because insurance companies usually get shirty about properties that are unoccupied for extended periods, I was just wondering.

[keisha1103]

We are buying a condo in the US and seem to be having very good luck with State Farm Insurance. Mind you, is it a condo and we only require tenant insurance. Let me know if you want any more info. Good luck!