A lot of Canadians have second homes in the United States because they like to travel and enjoy spending their vacation time in areas where the weather is inhabitable! Canadians actually are the leaders when it comes to foreign home purchasers in the United States. Are you a snowbird, or do you want to be? It's no secret that there are some great places in the U.S. where you can purchase a vacation home, but you might be worried about taxes. These are one of the most problematic things about purchasing that vacation home, and can make your investment a lot more of a problem than you thought it need to be. But, don't fear! With the tips below you may be able to minimize your taxes!
What About Title and Ownership?
A lot of people don't realize that when the owner of a property dies in the United States, the U.S. estate tax liability can arise. This happens when the transfer of the taxable estate happens. And, if the property is held jointly, that can cause a lot of problems for the other person that is still living. Unfortunately this means the value can be taxed twice. You'll need the help of real estate agent in Marco Island to deal with local probate fees in the event of an owner dying, and that can mean additional court fees as well as legal fees.
Corporation Holding for Purchases
In the past, many Canadians would keep their properties in the United States in Canadian corporations. The rules have actually changed, and there are now applicable taxes for individuals who use the property personally. This can mean you have to deal with taxes you thought you could avoid, but avoidance will only happen if you had put the property in the corporation before 2005. If not, it's best to avoid using a Canadian corporation for your property in the United States.
Should You Use a Trust?
Joe Samson, a real estate agent in Calgary, says that many Canadians these days consider choosing a trust to hold their property in the United States. This is because it allows one person to transfer the title to another person. The trustee would then be able to hold the assets for beneficiaries. Since the trustee would be the one to purchase the property in the U.S in the name of the trust, this would result in being able to avoid taxes as part of the U.S. estate of the settlor (the person who transferred the title of assets). Okay, so what does all this mean? Basically that if you plan on purchasing a home in the United States, using a trust is a great way to avoid estate taxes!
To find out more about all of this (and ask questions that I'm sure you have), give us a call at 239-963-6268. It's always important to speak with an experienced real estate agent before you make big purchases like this, especially in other countries. There are a lot of rules and laws that you have to abide by, so knowledge is important and experience is a must!