As a US resident with Canadian rental property, you're dealing with two tax authorities: the CRA in Canada and the IRS at home. The good news? With proper planning, you can minimize your tax burden on both sides of the border.
Key Insight
The Canada-US Tax Treaty prevents double taxation. Tax paid to Canada can generally be claimed as a Foreign Tax Credit on your US return.
How Cross-Border Rental Taxes Work
When you earn rental income from Canadian property as a US person:
- 1
Canada taxes the income first
As the "source country," Canada has the right to tax rental income from Canadian property.
- 2
US taxes your worldwide income
As a US person, you must report all income—including Canadian rental income—on your US tax return.
- 3
Foreign Tax Credit prevents double-dipping
You can claim a credit on your US return for taxes paid to Canada.
Why NR6 Matters Even More for Americans
Without NR6, Canada withholds 25% of your gross rent. This creates a cash flow problem and complicates your Foreign Tax Credit calculation.
US Tax Obligations to Remember
- Report Canadian income on your US tax return (Schedule E)
- File FBAR (FinCEN 114) if Canadian bank accounts exceed $10,000
- File Form 8938 (FATCA) if you meet the asset thresholds
- Claim Foreign Tax Credit (Form 1116)
Cross-border taxes are complex. We recommend working with a tax professional familiar with Canada-US issues, while we handle the NR6 side of things.
