Do Canadians Pay More Taxes Than Their American Neighbors?
A leading Real Estate Attorney in the Naples/Marco Island area of Florida is passing along information to help clear up the misnomer that Canadians pay more taxes than their American neighbors. Property Tax Rates and Rules are the same for everybody, regardless of home country.
The following is from Attorney Ron Webster:
One common myth many Canadians have is that they pay more tax than their U.S. counterparts upon either income from rental property or capital gain upon sale. Fortunately, this rumor is simply a myth. Canadian citizens pay the same tax rates as U.S. citizens. Presently, on rental income the amount of tax is 15% PROVIDED there is a profit after all expenses are paid. Similarly, the amount of tax on capital gain is presently 15%.
Some of the confusion may lie in a misunderstanding of FIRPTA which is a process where any foreign citizen must withhold 10% of the gross proceeds from the sale of property in escrow until such time as a determination can be made as to the exact tax owed at the time of sale. However, if an application is applied in advance many time a withholding certificate can be issued and 10% escrow of funds will not apply.
In regards to death taxes these can be avoided in the states if the title is properly set up in advance at the time of purchase.Typically, we would set up a land trust that avoids probate while providing an enhanced life estate to the property owner with a power of sale. If it is sold at a later date they would reap the benefits and the tax is at the personal rate of 15% which would be credited against Revenue Canada’s tax liability. In the event of death there is no value to the life estate and we do not file a tax return, rather at a later date when the beneficiaries sell they step into the shoes of the original grantor and pay capital gain upon the initial basis.
This was just a brief overview and hopefully not too confusing….feel free to get back to me 407-312-4000 or to Ron Webster, Attorney at 239-394-8999 for any followup questions you or your clients may have.