Taxes on US Property Rentals

Taxes from Rental Income: Canadians Receiving Rent on US Property

What needs to be filed, with whom and by when? Not knowing the answers can be costly and may mean missing deductions or being subject to a 30% withholding tax

Rental Income and Non-resident Tax

  • If you are receiving rental income from real property situated in the U.S., you are subject to a non-resident withholding tax of 30% of the gross rental income
  • Your withholding agent is required to provide you with Form 1042S, detailing the amount of gross rental income received and the amount of non-resident tax withheld. Form 1042 must also be filed with the I.R.S.
  • You may elect to file a U.S. tax return and pay tax on the net rental income at the graduated rates, which is usually more beneficial. The rental return must be filed in a timely manner in order for the election to be valid

Eliminating Your Withholding Tax From Rental Income

  • You may eliminate your non-resident tax withholding at source by advising your tenant that you have elected to file a U.S. tax return and by providing them with Form W-8ECI. You will need a U.S. tax identification number in order to make this election

Tax Return Filing Requirement for Canadians Receiving US Rental Income

  • You must file a U.S. tax return if you have not had non-resident tax withheld. If you do not file the tax return within the specified time period, the IRS will disallow all deductible expenses as well as any related loss carryovers. In addition, the I.R.S. will assess penalties for late filing and underpayment of tax.

Eliminate the Guesswork, Call Peter Aylett for Professional Assistance With:

  • Filing the necessary rental returns to help you minimize your tax liability
  • Reducing your non-resident tax withholding at source
  • Accurately preparing the appropriate forms on behalf of your agent


*This information is general in nature and does not constitute professional advice. We recommend that you obtain the appropriate accounting, legal or other professional advice before acting on any of the information contained herein.