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Canadians Buying Property in Florida – The Tax Issues

My wife asked me the other day about my thoughts on buying property in Florida.   As an East coast Canadian, I must say that the fantasy of owning property where it’s sunny most of the time is quite appealing.  Not only that, this seems like great timing as the Canadian Dollar is slightly greater than par, and the Florida real estate market is in the dumps.   Snapping back to reality, my thoughts immediately focus on the financial implications of owning property in Florida (or the U.S in general), specifically the tax issues.

With that, I dug into my tax books and did some searching over the net to come up with the basics of tax issues when owning property in the U.S.  I’m not a tax professional, so these are some basic guidelines to give you a starting point for further research.

Rental Income

If we were to buy a property in Florida, we would likely only be able to visit once a year for a few weeks at a time.  For the rest of the time, instead of letting it sit idle, the ideal situation is that the unit could be rented on a weekly or monthly basis.  Sounds like a great idea with the potential for capital appreciation, but there are U.S tax rules to be followed.

For one, U.S based rental income would require the investor to file a U.S tax return every year which is a drawback in my eyes.  The rental income is subject to a 30% withholding tax which is not included in the U.S/Canada tax treaty like when receiving U.S dividends (how investment withholding tax works).  To get around this, KPMG recommends to file the U.S return with the election to pay tax on net rental income.  The Canadian, in this case, will receive a tax refund in the amount that the withholding tax exceeds the tax payable on net rental income.

Capital Gains

Next question is, what happens when I sell?  You guessed it, capital gains tax.  The sale of the property results in a 10% withholding tax which is offset by the capital gains payable when filing the mandatory U.S tax return.  According to KPMG, the maximum U.S tax rate on capital gains for assets held for more than 12 months is 15%.  There are some rules around reducing the withholding tax such as applying to the IRS, well before closing, on the basis that the expected tax liability will be less than the 10% withholding tax.

Property Tax

This is a hot topic for non-resident Florida home owners as there is a two-tiered system.  Both tiers pay the same property tax rate, but there are differences in the home valuations on which the property tax is assessed.  The largest difference is in the amount that the property taxes can increase year over year.

As the Florida market is at a low right now, one can only assume that it can only go up from here, but what if market values increase by 20% in a year?  A 20% increase would be a pretty steep property tax grab.  In this case, resident Florida home owners will face a maximum increase of 3% a year, and non-resident home owners face a  maximum home assessment increase of 10%.  In addition to this, I believe that resident homeowners pay their property tax based on the assessed value minus a fixed amount thus leading to a reduced assessed value.

Estate Taxes

This is where it can get a bit tricky as the U.S has estate taxes.  According to KPMG though, Canadians will not be subject to U.S estate taxes unless their worldwide gross estate exceeds $2M USD (2008 numbers).   Even if there is no estate tax payable, the estate must file a U.S estate tax return if the property is worth over $60k.

There are obviously many many more details to U.S taxes and property, so best to consult a qualified tax professional for the finer details.

If you have property in Florida, or doing research towards buying one, I would appreciate any additional information that you can provide in the comments.

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FrugalTrader About the author: FrugalTrader is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 26 comments… add one }

  • Pierre Fregeau October 13, 2014, 5:40 pm

    Hello Kathy and Ashfa,

    Thank you for the kind words, Ashfa. I am still waiting for you…LOL

    I cover all of South Florida but from Cape Coral to Naples/Marco Island and also the East Coast from Palm Beach to Miami. Siesta Key is about 100 miles North of Naples.

    There are still some good values in the market but even though prices have recovered quite a bit since the lows of 2007- 2008.

  • Kathy October 14, 2014, 1:51 pm

    Pierre and Ashfa:

    Thanks so much…I too am a little on the slow side Ashfa, I have just junder 5 years till I retire and my husband will likely stay on the job a few years longer but we are looking to buy something in the next year or two for sure so that by the time I actually retire full time I have somewhere to spend my winters or at least 4-5 months of the worst of it!
    And Pierre, we would also consider the area just south of there, we have been to Siesta Key area before and loved the area, my parents spend the winters in Ft Myers and love that area but my husband and I are huge sports fans of both Football and Hockey and thought with Tampa being not to far away it would be convenient to go to some games, as well I am a runner and have joined in on some of the runs and local races with one of the Running Club’s in the Bradenton area. Perhaps I can call you or email you when we are next in the area (We are planning for this Christmas or shortly there after to visit) if you can leave me your number or email. Thanks so much again,


  • Pierre Fregeau October 14, 2014, 2:02 pm

    Thanks Kathy,

    My only recommendation is not to wait too long. Prices have been going up at over 10% in many areas and some communities, as much as 20% Y-O-Y.

    The real season starts in January, that’s when prices go up!

    In the right community, you can out your property during season, Jan – April and pay for all your maintenance and taxes. Think about it.

  • Judy October 14, 2014, 2:54 pm

    With the dollar what it is this is horrible time to buy US Real Estate ,just go to CNBC and read the comments on the real estate reports there.I would hedge my money some of these gains are going to be lost in 2016 if not sooner.

  • Kevin October 14, 2014, 4:02 pm

    Not so sure Judy if the candain $ might still have a ways to drop so still might be OK to park some cash in US property, if its appreciating and the dollar dropping its a win win…..

  • Pierre Fregeau October 14, 2014, 8:00 pm

    For those of you worrying about the value of the Canadian Dollar.

    I had a booth today at a Real Estate trade show, in Naples, FL, that was attended by the general public and many Realtors from the area.The biggest complaint I heard all day was “there is no inventory”, there’s nothing to sell”… and it is true, the inventories are so low that, for any price range that one can think of, whether it’s under $300,000, $300 to $400,000 or even over a Million, the choices are very limited. But the demand is still there… and season doesn’t officially start until January. What are we going to sell?
    This low inventory situation is certainly fueling the rise in prices.

    Our only salvation right now are the many new single family construction projects. But one would have to wait from 6 months to 1 year to move in as the building crews can’t keep up with the sales.
    For those people buying single family pre-construction, there could be a nice profit of 10%++ by the time they move in next year.

    Now back to the reason for this post.
    You can speculate all you want as to the value of the Canadian Dollar in 1, 2, 5 years. For every Expert that predict that it will go up, you can find another one who will say the opposite.

    What is your prime intention?
    To buy a property or to speculate on currencies?
    If you want to speculate on currencies, buy or sell FOREX contracts.
    If you want to buy a property? Find one that you like, will enjoy and possibly make a profit long term.
    Don’t mix buying a property with currency speculation.

    Those are the same concerns that people had 5 years ago + at that time, people were still expecting the markets to go lower. The ones that bought at that time, are sitting on LARGE profits.

  • Kathy October 15, 2014, 1:14 pm

    Thanks so much for the info Pierre, and we will be in touch soon then!


  • Pierre Fregeau October 23, 2014, 10:25 pm

    Continuation of post 208

    For those of you worrying about the value of the Canadian Dollar.

    There was an article titled “Canada’s biggest banks say the worst is to come for the Canadian dollar” in today’s Financial Post that have the Canadian dollar drop to 85 cents and even 77 cents, long term.

    With that in mind, it may be time to accelerate one’s real estate investments in the USA.

  • Gary October 24, 2014, 9:00 am

    The house we bought in 09 has now doubled in value. You need to hit the bottom like we did. I don’t think there is much chance of finding any bargains now. The cheap houses have major issues like Mold and filth, termites or rot. Or are in the bad sections of town. I think it best you just find a rental for your winters

  • Pierre Fregeau October 24, 2014, 10:05 am


    I don’t know which part of Florida, you bought your property in ’09, so I will agree and disagree with you.
    Congratulations on your good investment. There are many cases like yours in Florida, where real estate investments have taken 50 to 100% in value in the past 3 to 5 years. There are also other examples where the values have gone up only in the 10 to 25% range or have not move at all.
    They say “Location, location, location”. Buy in the wrong area and you may be sorry, long term. It’s all about doing your homework.

    Now I disagree with your assessment that there is little chance of finding any bargains and that “cheap houses have major issues”.
    In any market and any price ranges, there are always opportunities. Here’s a quick example: on my street, a home sold at auction online for $252,000 in June, 2014. (God, I wish I could have freed up some cash!) Given, the house needed some pressure washing on the outside, clean up and paint inside. After the sale, a team came in to rip the carpets, paint, pressure wash… I estimate the work at $50,000 +/-. It is on the market, right now, for $419,900 and this is a price in line for that type of house.
    There are many houses and condos that are available at a decent price in good neighborhoods all over Florida and that, over time, will gain in value. But don’t expect to pay $100,000 on the beach and sell it for $500,000 in 2 years.
    As prices for real estate recover, so do rentals. On the beach in Naples, FL in 2010, one could find many condos for $4500 to $6000 per month, in season. Now, you are lucky to find anything under $6000. Think closer to $7000 – $9000 and that is not for the penthouse!
    You can still find condos for rent in season, “not too far from the beach” for $3000. Stay for 4 months and you spent $12,000 + 10% tax + cleaning fee + application fee + currency exchange fee. $12000++ that goes down the drain. Read posts 208 and 210 again…

    Real Estate investments are NOT get rich quick schemes. Historically they have kept up with inflation and more. Unless you are a speculator, buy a decent property that you will enjoy, in a good location and over time, you will not be disappointed. Do your homework.

  • Mike October 24, 2014, 11:14 am

    I’m just back from a brief visit to our place on Kissimmee’s westside. I can tell you that, at least where we are, new builds are booming. Across the street from us, Paradism Palms is well into yet another phase of townhomes, they have not slowed since we purchased our place at Caribe Cove, in 2012. Just up the road from us, the lot that stood empty for the past two years is now being prepped to becoming a brand new ‘Windsor Hills’ sister resort. Add to that, less than a mile up the road the other way, they are buidling yet another resort of ‘5 bedroom’ town homes.

    Business is booming in this location. Having said that, there are still deals to be had, be it condos, townhomes, or single family dwellings. The rock bottom prices of 2010-2011 are gone, but when you compare what your cash can get in Florida, as opposed to what it will get me in my own neighbourhood here in Ontario, there’s almost no comparison.

    Prices have been on the rise. I can say that a conservative estimate of what our property is worth today, as opposed to our purchase price in 2012, is about a 55% increase. Now, will the Cnd dollar sliding, expenses are rising. As well, Osceola county has already begun reassessing property values, which means our property taxes are going up. But I expected this. My hope is the dollar maintains at least 85 cents for the next couple of years, after that we can reassess things. For now, we’re happy with our purchase, just wish we could be down there more. Cheers!

  • Pierre Fregeau November 3, 2014, 8:58 pm


    First, congratulations!
    Second, thanks for the update in the Kissimmee area.
    Third, as the CDN Dollar’s value goes down compared to the US Dollar, yes your carrying costs go up but, if your capital gain was transferred back to CDN $, you sure would be more than smiling!!!

  • James croft December 8, 2014, 2:48 pm

    We purchased a 1,000 sq ft condo in Punta Gorda (30 minutes north of Ft Myers) March, 2014 for $ 58,000. We are approx’ 30 min from the beach. It is a nice area. The amenities have a very nice pool, rec centre for get togethers, bocci ball, mini putt, and shuffleboard. We also have tennis courts and pickle ball courts. The complex is very well kept. We also have approx’ $1 million in contingency for the complex. Many amenities nearby (walmart, Home Depot, food, etc).
    Carrying costs for the year is $4,000 (200 month HOA, $850 taxes, $40 month utilities). It cost us $60 per month for internet and basic cable. We also have the maintenance supervisor checking our place once a month for $100 for the year! The cost per year is about what my wife and I would pay for a 2 week vacation for many destinations.
    We decided to retire after furnishing it this past spring and realized life is too short to waste. When we are old and grey, we will have additional money from the sale.
    As for buying in the Florida, the whole process was EXTREMELY easy. I was actually waiting for something negative to happen because I couldn’t believe how simple it was. The whole experience was great from beginning to end.

    So are there values out there? I think there is, especially if you are not planning on renting it out and just want to live in Florida for a portion of the year, within a reasonable drive to the beach
    Just my perspective based on my experiences this past year.

  • Lori February 8, 2015, 1:29 pm

    We are considering purchasing a single detached home near Orlando. The prices have increased but with the exchange rate being so terrible (we’re Canadian), we’re a little nervous to go ahead with it. Doing a lot of research is so important, also finding a great realtor who is familiar with the area. We have been talking about this for years now so I think we should finally make a decision either way!

  • Gary February 8, 2015, 9:55 pm

    Its too late now. You missed the window. With the fees you are looking at 30 cents more on the dollar. You need to wait for the dollar to rebound later this year. Home prices wont rise much now for a couple of years. Wait for the dollar.

  • Kevin February 9, 2015, 9:50 am

    I agree with Gary. Lori you missed the best buying opportunities over the last 3 years. I purchased a condo 3 years ago for 70,000 and it is now selling in the 160,000 range. With the exchange rate it would cost me over 200,000 now for the same unit. I don’t see much more upswing in prices in the immediate future.

  • Steven P. February 10, 2015, 4:21 pm

    I don’t understand why everybody’s complaining about the taxes in Florida. I’ve searched for a condo for a couple of months and several states were on the radar. We ended up buying a riva apartment (one of these here http://riva-condo.com) and now I’m facing taxes that aren’t exceeding my expectations. The only thing that’s important before purchasing a property is to inform yourself. Otherwise you could be disappointed when you get your first bill.

  • Jeff April 21, 2015, 9:09 pm

    Can Canadians rent out there property for 12 months out of the year without a lease in the United States (To United States Citizens) and Not report that Income To The United States Government ? ..Is legal or illegal?

    • Pierre Fregeau April 21, 2015, 11:02 pm

      Great question Jeff.
      The short of it is YES a Canadian can lease their property and not report the income.
      But it is illegal and I hope you don’t get caught.
      Many people earn income through jobs or other ways and do not file income tax reports but, most of them eventually get caught. And I can tell you that it HURTS.
      Paying income tax is not that bad and it is certainly cheaper than getting caught.

  • Mike April 21, 2015, 11:02 pm

    It technically would violate their tax laws. I’m not a professional, just a condo owner, and one who does not rent our unit out. But I did discuss this with my property manager. If we technically rented our unit, even just on a couple of occasions, we would have to declare the income to the IRS. In our county, Osceola, this would also mean applying for an ITIN number (international tax identification number). Once this is done, we would then have to apply for a Business license, and so forth. I understand different counties have their own requirements, Osceola is one of the more stringent ones. This is all done to ensure the various levels of government get their cuts (county tax, tourism tax, etc). And of course you are then required to file your income tax annually with the IRS. An accountant would be required. I’m sure someone else will chime in but what you suggested is technically possible, but it wI’ll violate US tax laws.

  • Pierre Fregeau April 21, 2015, 11:16 pm

    I agree with you. If you rent your property for a term of 6 months or less, you have to pay the state of Florida a 6% Tourism or Bed tax and a local County tax between 4 and 5% to your county. Usually that tax is added to the rent that you charge your renter. If you rent your property for $2000 per month for the winter season, the renter will pay you $2000 + the 10 or 11% Tourism tax that you will, in turn, remit to the state and County.
    You will have to file a tax return with the IRS. In order to file, you will need an ITIN (Individual Tax Identification Number) which is relatively easy to obtain. You can file your tax return without the help of an Accountant once you know how to do it.

  • Dan May 3, 2015, 10:20 pm

    Hi everyone and thanks to the Frugal Trader to host this most interesting site. I am in the process of purchasing a condo in Daytona Beach on a private sale basis. The seller will pick the title Insurance company and escrow agent, and it is a cash deal so it is simple from my side. I am wondering about the need for a real estate lawyer and I am leaning that way as real estate agents are not involved and I am new to purchasing a property in the USA. Does anyone have a recommendation for a good attorney that charges a reasonable rate, perhaps a flat fee to support my purchase?

    • Ron May 4, 2015, 12:44 am

      Hi Dan,
      As a Realtor in Florida and Toronto…it is done a bit different in Florida. The title company is the one that conducts the closing, checks for liens, open permits, violations, conveys and ensures clear and marketable title and also issues title insurance. There is no need to bring in a real estate lawyer for residential purchases. Real estate lawyers are usually called upon if dealing with a commercial property purchase.

      • Dan May 4, 2015, 11:54 pm

        Thanks Ron, I have seen many great posts from you on this site. OK so I should not need an attorney, that’s good. The seller will select the title company and pay for the title insurance. I am nervous about sending the cash for the transaction to the title company or escrow agent, as there have been been a few horror stories of disreputable firms. Can I assume that a “higher profile” title company or escrow agent would reduce that risk considerably? Also as the seller pays for the title insurance, what can a buyer expect to pay for closing costs on cash deal? Thank you for your advice, Dan

  • Eric December 15, 2015, 2:19 pm

    After years of looking we finally pulled the trigger and bought a detached home in Orlando this year. I know I know we missed the “buying opportunity of a life time” by about 2 years, but we still got in when the dollar was about 90 cents US, and home prices are on the rise, so not a jackpot but still a good long term investment I hope.
    Now I am in the process of looking for a good property management company that can look after the rental of our house, if anyone on this forum knows of a good one I would appreciate the recommendation. TIA.

  • Paul Lambe February 11, 2016, 5:41 pm

    If your spouse passes away and you own a home in Florida, what are the issues with estate, tax, and how do you transfer it to the survivor’s name?

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