That you, the tax payer want to make the election;<\/li>

A complete list of all of the real property (you cannot decide to elect some and not others), or any interest in real property, located in the United States (including location). Give the legal identification of U.S. timber, coal, or iron ore in which the taxpayer has an interest;<\/li>

The extent that you own the property (if there are any partners);<\/li>

A description of any substantial improvements to the property (used to calculate the starting basis of the property);<\/li>

Income from the property (if partners, including spouse \u2013 your portion);<\/li>

The date(s) property is owned;<\/li>

Whether the election is under section 871(d) or a tax treaty;<\/li>

Details of any previous elections and revocations of the real property election. <\/li><\/ol>\n\n\n\n

Once you make this election, it is not revoked in future years unless you decide to revoke it. If you acquire new property, you will have to up date the list (you should have one in your records in case the IRS wants to see it). There is a deadline for making the election,the 1040NR is normally due by the June 15th of the year following the calendar year the property was acquired. However, the ability to elect to treat the rental income as effectively connected with a U.S. trade or business will be lost after 16 months from the original due date of the return. If the election is not made in a timely manner, you may get stuck paying the 30% instead. <\/p>\n\n\n\n

There are a few things that must be mentioned here \u2013 even if your partner is your spouse \u2013 both of you will have to file a 1040NR, separately. When claiming your expenses \u2013 you MUST claim depreciation (this is a big difference when compared to Canada). Many of the expenses claimed in Canada on a rental property can also be claimed in the US \u2013 the main difference is the previous point. I think the IRS\u2019s reasoning for this is they want to potentially recoup some of their money once the property is sold. You may also have to file a State tax return, depending on which state you are in.<\/p>\n\n\n\n

Esmeralda must also claim this income in Canada on her Canadian return. I do not know how many times that I have heard \u2013 \u201cMy rental is in the States so I don\u2019t have to declare it\u201d. It actually does have to be claimed on your Canadian tax return, including when you actually sell the thing. When claiming in Canada, you do not have to claim depreciation on the Canadian side. If a profit is made on the rental income \u2013 you may be able to claim a foreign tax credit so you are not taxed on both sides of the border. As well, if the property is over $100 000.00 and you are using it as a rental, you must report the property to Canada on T1135 (Foreign Income Verification Statement). I will explain to Esmeralda about the T1135 and why it is so important in my next post.
<\/p>\n<\/body>","protected":false},"excerpt":{"rendered":"

Esmeralda has come to a landmark decision \u2013 on top of her gambling, she chose to invest in real estate to diversify her portfolio. She was also getting sick of staying in hotels. In order to avoid hotels \u2013 she went out and bought a house where she has decided to stay when she gambles … Continue reading “Esmeralda Buys US Property”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5],"tags":[11,10,9],"class_list":["post-282","post","type-post","status-publish","format-standard","hentry","category-tax-and-financial","tag-real-estate","tag-rental-prperties","tag-us-tax"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/posts\/282","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/comments?post=282"}],"version-history":[{"count":6,"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/posts\/282\/revisions"}],"predecessor-version":[{"id":289,"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/posts\/282\/revisions\/289"}],"wp:attachment":[{"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/media?parent=282"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/categories?post=282"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxpaws.com\/index.php\/wp-json\/wp\/v2\/tags?post=282"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}