Nonresident aliens, on the other hand, generally are taxed only on their income from U.S. sources, with some exceptions. As a result of limited exposure to U.S. tax, deductions and exemptions available to nonresident aliens are limited.
A Canadian snowbird will be treated as a resident for tax purposes if he/she meets either of two tests the lawful permanent resident (or green card) test, or the substantial presence test. Under the first test, a Canadian citizen who is a lawful permanent resident of the U.S. a green card holder is considered a resident for U.S. income tax purposes. A green card holder is treated as a U.S. resident, whether or not he/she is physically present in the U.S., until such time as permanent resident alien status under U.S. immigration law is officially revoked or abandoned.
Under the second test -- substantial presence -- a foreign national may become a U.S. resident for tax purposes if he/she spends a substantial portion of the year in the U.S. Under the substantial presence test, a foreign national will be considered a U.S. resident for tax purposes if:
- The individual is present in the U.S. on at least 31 days during the current calendar year; and
- The sum of the number of days of U.S. presence during the current calendar year, plus one-third of the U.S. days during the first preceding year, plus one-sixth of the U.S. days during.
- The non-resident will be treated as being present in the U.S. on any day that he/she is physically present in the U.S. at any time during such day.
However, days spent in the U.S. because the individual is unable to leave the U.S. due to a medical condition that arose while present in the U.S. will not count the second preceding calendar year, equals or exceeds 183 days.
The law treats presence in the U.S. for such a medical condition as
Example 1: Year Days Present in the U.S. EquivalentDays 1996 120 120 1995 120 x 1/3 40 1994 120 x 1/6 20 (Foreign national taxed as non-resident of U.S.-180) Example 2: Year Days Present in the U.S. Equivalent Days 1996 130 130 1995 120 x 1/3 40 1994 120 x 1/6 20 (Foreign national taxed as resident of the U.S.-190)
Thus, Canadian snowbirds who stay for long periods of time in the U.S. should be aware of the requirements for the physical presence test, lest they be considered a U.S. resident for income tax purposes. If that happens, a Canadian will be required to file a U.S. tax return and may be required to file a U.S. income tax return to report income from all sources, including income from Canada. As a general rule, if a foreign national has never spent more than 121 days in the U.S. in any tax years, he/she will never be considered a U.S. resident under the substantial presence test..(Courtesy of The Law Offices of Joseph C. Grasmick). (Always consult the appropriate Law and Tax Professional prior to buying anything in the US.)
2. Can a Canadian resident buy a home in the U.S?
Yes, you pay money, take title, no different than anyone else.
3. Can we get a mortgage in Canada to buy in the U.S?
The terms of the loan are bit more favorable if you are seeking to purchase a second (vacation) home in the United States. The definition of a vacation home is that you intend it use it for recreational purposes during a portion of the year and you do not derive any monetary benefits from ownership. Meaning you do not rent the place to a tenant. You will be asked to sign a disclosure statement to this effect.
If you are purchasing a vacation home then you will need a minimum of 30% down. So, for a $200,000 purchase the requirement down payment is $60,000. Additionally, you will be required to demonstrate that you have between 3-6 months of liquid reserves. This is calculated by multiplying your monthly payment by 3-6. Not all lenders require this reserve but many do, so if you have it the better it is for you.
As part of the approval process you will be asked to show 2-3 months of bank statements demonstrating that the funds for down payment and reserves are available. The lender is very suspicious when there are large depositions in your account (beyond your regular income) so be prepared to explain any such depositions. Finally, the assets need to be in a Canadian bank and the mortgage lender will request verification directly from your bank.
You will need to show a copy of your Canadian passport and/or driver’s license. Some lenders may request only one of these two but be prepared to furnish both if requested.
If you intend to purchase an investment property in the United States then the terms are somewhat more stringent. You will be required to put more than 30% down (determined on a case by case basis) as well as demonstrated more reserves (possibly up to twelve months). All other aspects of the loan are the same.
If you feel like these are conditions which you can fulfill then the first step is to complete a mortgage application with a reputable lender. In this step you will be asked information about such things as your employment and income, available liquid assets etc. In subsequent steps you will be required to furnish a letter of employment, relevant bank statements and a copy of the passport (or driver’s license). Once all the information has been verified the lender can then make a credit decision.
Be aware that with many mortgage companies you do not need a particular property in mind to go through this process. We can do what is called a “credit approval” for you up to a certain price range. Then as long as the property you end up purchasing is within that price range all we need is an approval on the property/appraisal. After that we are able to close the transaction.
4. Anything relating to Property Tax I should know about?
Property taxes may be higher because you are non-resident, this is especially the case in Florida but other States also have smaller "homestead" exemptions that you will not qualify for as a non-resident. Any sort of sales tax rebate that a State may have (and they are rare) you would not qualify for.
5. Are there any Income Tax issues to worry about when I own Rental property in AZ and have residency in Canada?
6. Can I rent out the property once purchased?
Yep. Be aware of State laws on landlord responsiblities, etc.
7. Would a property manager/agent be required if I want to rent out my property?