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Where are taxes paid on Canadian-owned USA rental property income?

Region: Ontario Answer # 1086

If you receive rental income from real property owned in America, you must pay a non-resident withholding tax of 30% of the gross rental income. The 30% cannot be reduced. However, if the rental income is connected to a business, then you can deduct expenses to run that business and be taxed on the net income at graduated rates. To do this, you must do the following:

  • complete form W-8ECI which has to be submitted by the tenant to the IRS; and
  • file a U.S. tax return as a non-resident (form 1040NR). The return has to include a statement that an election has been made. To file this form, you will also need to get an ITIN: a U.S. Individual Taxpayer Identification Number by completing a form W-7.

More information about foreign individuals paying taxes in the USA is available from the Internal Revenue Office (IRA).

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