what are the tax implications of selling my canadian home?

dayrose
New Member



Joined: 10 Jun 2008
Posts: 1

Posted: Tue Jun 10, 2008 10:08 am

 

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Hi,\
I am a Canadian and am married to a US citizen. We got married in November of 2007 and I have my green card now. I have several questions about taxes.

1. I want to sell my Canadian home. I have owned it for over 10 years and I have had a housesitter there since I came to US last August.I want to sell it now.what are the tax implications. Is it still considered my primary residence? If now how can I make it so.

2. How do we deal with taxes in general.I worked in Canada in 2007 but have not filed yet because when I started to it asked if my marital status changed in 2007 and then it asked for my husbands SIN which he does not have.
3. How do we report our income in US? ( we have filed an extension but I now have a ssi number so could go ahead anytime. I am not working here.my husband supports us.however we would like to go to Canada for the summer and I would like to work at my former self employed business when we are there.

4. If this is too complicated for this forum can you please reccomend someone I can contact to help us sort all this out! Thanks soooo much

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1122
Location: Calgary

Posted: Tue Jun 10, 2008 10:39 am

 

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Your tax home automatically becomes the US on the date that you entered the US in LPR status (the date stamp in your passport). Thus it is really important to sever all "residential ties" to Canada ASAP to avoid dual taxation. On your T1 for 2007 you should make note of the date you left Canada.

Probably not a wise idea to declare your house in Canada as your primary residence now, because you will be subject to Canadian taxes up until the point you sell it as it's obviously a residential tie. (Although this may not be a big deal if you have had no income since then). The problem is that the CRA has 25% withholding on sale of properties by non-residents in order to assess capital gains tax. Since November the CGT will probably be minimal (15% of the increase in value since it ceased to be your primary residence). You can get a ruling from them though as to what the CGT is, and then the vendor withholds that amount as specified in the ruling.

If you can pull it off, it's best to put your departure date down on the T1 for 2007 as 31st December, but it depends on when you got LPR status in the US (i.e. mustn't have had it before the end of 2007). If you can it saves you from filing a US tax return for 2007 and you don't have to worry about it until next year. Plus you don't have to pro-rate your personal exemptions for the portion of 2007 you were in Canada.

If you were resident in Canada for tax purposes for a portion of time (i.e. the first few months of 2008), you will have to file three tax returns, a T1 for the portion of time you were a resident of Canada; a 1040NR and a Form 8840 for that portion of time with the IRS and a 1040 (dual status return) for the portion of time from when you became a permanent resident of the US. For this reason it's a pretty good idea if you can pull off the "became resident in the US for tax purposes on January 1st" if at all possible because then you only have to file a 1040 like everyone else next year.

Remember that residency for tax purposes doesn't necessarily mean you were physically there. If you for example declare to the CRA that your house became a vacation home from January 1st onwards and you've cut other residential ties and declared non-residency to your Canadian bank, etc. and you had a lawful right to reside in the US from January 1st, you had a residential tie to the US (your husband) etc. there is a bit of "fudge" room there to say when your tax home actually moved.

Once your tax home is the US you obviously file a US tax return. If you work in Canada, you must declare any income from it, have a look at Form 2555.

Be careful of not ending up being considered a resident of Canada for tax purposes if you come back, you can claim a foreign tax credit in the US on Form 2555 for any tax you have to pay on work done in Canada, the problem is that as a Canadian citizen with a house, bank account etc. you can end up being declared resident for tax purposes. As a self-employed person best idea is probably to register in the US as self-employed, get a sales tax number in the State where you live, get an EIN, etc. I.e. establish the business in the US rather than Canada, even if the work is done in Canada.

Have a look at CRA Form NR-73. And read this: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html
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Steve.

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