Canadians can buy property anywhere in the United States, and many do, from winter homes in Florida and Arizona to rentals in border cities. A US purchase brings its own financing (a Canadian mortgage can’t be registered against a US home), payments in US dollars, tax filings in both countries, and possible US estate tax. This guide covers each piece, and is part of our guides to mortgages outside the standard bank route. For the practical side of spending winters south of the border (time limits, health coverage, the substantial presence test), see our Canadian snowbird guide.
Financing a US property
The options
| Option | How it works | Down payment | Payments in |
|---|---|---|---|
| Cross-border mortgage from a Canadian bank’s US arm | RBC and TD own US banks (RBC Bank and TD Bank) that lend to Canadians buying in the US, using Canadian credit history and income documents | Commonly 20% to 30% | USD |
| US lender, foreign national program | A US bank, credit union or mortgage company lends to a non-resident; usually needs an ITIN and may want US credit history | Commonly 25% to 35% | USD |
| HELOC on your Canadian home | Borrow against your Canadian home and buy the US property for cash | None on the US side; needs equity in Canada | CAD |
| Cash | Savings or investments converted to USD | 100% | None |
Cross-border mortgages are the usual route for buyers who want a US mortgage without a US credit history. TD Bank’s US network is concentrated on the East Coast, from Maine to Florida; RBC Bank serves cross-border clients in most states. US mortgages commonly come with fixed rates for the full 15 or 30 years, unlike Canadian mortgages, which renew every few years. Today’s Canadian mortgage rates aren’t a guide to US rates, which follow the US market.
A HELOC avoids a US mortgage application and makes you a cash buyer, but it puts your Canadian home on the line, usually carries a variable rate, and leaves you borrowing in Canadian dollars to own a US-dollar asset. Our comparison of mortgages, home equity loans and HELOCs explains how the credit line works. Interest on money borrowed to buy a property you rent out can be deductible; on a personal-use home it isn’t.
| Cross-border bank | US lender | HELOC | |
|---|---|---|---|
| Canadian credit accepted | Yes | Usually not | Yes |
| ITIN needed for the loan | Not always | Usually | No (still needed for US tax filings) |
| Rate | US market rate | US market rate, sometimes a foreign-national premium | Canadian variable rate |
| Currency risk on payments | Yes (USD payments) | Yes (USD payments) | Yes (CAD debt, USD asset) |
What lenders ask for
| Requirement | Details |
|---|---|
| ITIN | An Individual Taxpayer Identification Number, applied for on IRS Form W-7; needed for US tax filings and by most US lenders |
| Income documents | Canadian notices of assessment, an employment letter or business financials; cross-border lenders accept Canadian documents |
| Credit | Cross-border lenders use your Canadian credit report; US lenders may want US credit history |
| Debt ratios | US lenders use a debt-to-income (DTI) ratio, similar to the Canadian TDS ratio |
| Reserves | Many lenders want several months of payments held in liquid savings |
| Property | Condos may need to be “warrantable”, meaning the building meets US lending standards |
| US bank account | For mortgage payments, property tax, HOA fees and insurance |
Currency risk
A mortgage, property tax and HOA fees in US dollars cost more in Canadian dollars when the loonie falls, and less when it rises.
A $2,000 US monthly payment at different exchange rates (Canadian dollars per US dollar):
| CAD per USD | Monthly cost in CAD | Yearly cost in CAD |
|---|---|---|
| 1.25 | $2,500 | $30,000 |
| 1.35 | $2,700 | $32,400 |
| 1.40 | $2,800 | $33,600 |
| 1.50 | $3,000 | $36,000 |
Ways owners manage it: converting money on a regular schedule rather than all at once, converting a lump sum when the rate suits, locking a rate for a future date with a forward contract, keeping a US-dollar buffer in a US account, or using US-dollar income where they have it. A currency exchange service usually charges a narrower spread than a bank’s posted exchange rate, which adds up on a down payment.
Costs at purchase
US closings run through a title company or closing attorney rather than a Canadian real estate lawyer. Expect title insurance, county recording fees, and, in many states, a state or county transfer tax (Florida’s documentary stamp tax is one example; see buying a house in Florida). The US has no federal foreign buyer tax. A home inspection, and in some areas termite, wind-mitigation or flood checks, come before closing.
Popular US markets for Canadians
| Market | Why Canadians buy | Typical property | State income tax |
|---|---|---|---|
| Florida (Fort Lauderdale, Naples, Sarasota, Tampa Bay) | Warm winters, beaches, large Canadian community | Condos and single-family homes | None |
| Arizona (Phoenix area, Tucson, Sedona, Prescott) | Dry, sunny winters, golf, 55+ communities | Single-family homes, retirement communities, condos | A flat 2.5% |
| California (Palm Springs, San Diego) | Climate and lifestyle | Condos, single-family homes | Yes, at high top rates |
| Hawaii | Vacation and rental use | Condos | Yes |
| Washington, Montana and other border states | Close to home, ski and lake properties | Single-family homes, cabins | None in Washington |
Florida has its own guide: buying a house in Florida as a Canadian covers its areas, hurricane insurance and the post-Surfside condo rules.
Arizona
Arizona is the main western alternative to Florida, within a two-day drive of western Canada.
| Area | Character | Draws |
|---|---|---|
| Scottsdale | Upscale; golf and dining | Higher-end winter homes |
| Mesa, Chandler, Gilbert | Suburban; spring training, newer neighbourhoods | Mid-budget buyers, part-year residents |
| Sun City, Sun City West | 55+ retirement communities with recreation centres | Retirees, lower budgets |
| Surprise, Peoria | Lower-cost suburbs west of Phoenix | Budget-conscious buyers |
| Tucson | University city, arts | Lower prices than the Phoenix area |
| Sedona | Red-rock scenery, tourism | Vacation homes and rental income |
| Prescott | Mountain town, cooler than Phoenix | Four-season climate |
What differs in Arizona:
- Taxes. Arizona’s state income tax is a flat 2.5%, which applies to Arizona rental income and gains; property taxes are low by US standards.
- Insurance. No hurricane exposure, so homeowners insurance usually costs far less than in coastal Florida.
- Climate risks. Summer heat routinely passes 40°C, the July to September monsoon brings dust storms and flash floods, and some communities restrict outdoor water use because of long-term water supply concerns.
- Pests. Bark scorpions and termites are common; a termite inspection is standard before buying.
- Property types. Single-family homes, condos, 55+ age-restricted communities (at least one occupant 55 or older) and manufactured homes in land-lease parks.
- Renting it out. Short-term rentals are popular in Scottsdale and Sedona, but city rules differ and many HOAs restrict or ban them; check both before buying with rental income in mind.
US tax for Canadian owners
While you own it
| Situation | US obligation | Canadian obligation |
|---|---|---|
| Property tax | Paid to the county or city every year | None |
| Rental income | File Form 1040-NR. Without an election, tax is withheld on gross rent; electing to treat it as business income (Section 871(d)) lets you deduct expenses and pay tax on the net at graduated rates (10% to 37%). File a state return where the state taxes income | Report the rent on your Canadian return in Canadian dollars and claim a foreign tax credit for US tax paid |
| No rental income | Generally nothing to file until you sell | See the T1135 note below |
Form T1135. Canadian residents report specified foreign property costing more than $100,000 in total on Form T1135 each year. The CRA’s guidance says personal-use property doesn’t have to be reported, including a vacation property used primarily as a personal residence, so a winter home you don’t rent out is usually outside it; a US rental property counts. Our T1135 guide covers the thresholds and penalties.
When you sell: FIRPTA
Under the Foreign Investment in Real Property Tax Act (FIRPTA), the buyer of a US property from a foreign seller must withhold 15% of the amount realized (usually the sale price) and send it to the IRS. That withholding is a prepayment, not the tax: your actual US tax is on the gain, and you file a US return to get any excess back. An application on Form 8288-B for a withholding certificate, made before closing, can reduce the withholding to the tax expected. No withholding is required when the buyer is an individual who will use the home as a residence and the price is not more than $300,000, provided they meet the IRS occupancy test.
A Canadian sells a US home for $550,000 US that cost $400,000 US. FIRPTA withholding is $82,500 US (15% of the price), but the US tax is worked out on the $150,000 US gain. The seller files a US return, pays tax on the gain, and gets back the difference between that tax and the amount withheld.
Canadian tax when you sell
The gain is also taxable in Canada, as a capital gain with a 50% inclusion rate, with a foreign tax credit for the US tax on the same gain. Canada measures the gain in Canadian dollars, using the exchange rate when you bought and when you sold, so a falling loonie can make the Canadian gain larger than the US one.
Bought for $400,000 US when the exchange rate was 1.30 CAD per USD: a cost of $520,000 CAD. Sold for $550,000 US at 1.40: proceeds of $770,000 CAD. The Canadian gain is $250,000 CAD, against a US gain of $150,000 US.
A US home can be designated as your principal residence for Canadian tax if you ordinarily lived in it, but each family can designate only one property per year, so using it for the US home gives up the exemption on your Canadian home for those years. Our guide to the principal residence exemption explains the designation.
US estate tax
The US taxes the US assets of non-residents who aren’t US citizens when they die, including US real estate, on the value above $60,000, at rates from 18% to 40%.
| Situation | Exposure |
|---|---|
| US assets of $60,000 or less | No US estate tax |
| US assets above $60,000, no treaty relief | Estate tax on the US assets above $60,000 |
| Treaty relief claimed | The Canada-US tax treaty gives a share of the US unified credit in proportion to your US assets over your worldwide estate; a Canadian whose worldwide estate is below the US estate tax exemption (an inflation-indexed amount in the millions of US dollars) generally owes no US estate tax, but the estate still has to file |
| Large worldwide estates | Exposure remains; cross-border structures may help |
Ways owners plan for it include a US will or codicil for the US property (which also eases US probate), a revocable living trust to avoid US probate, joint ownership (which may not avoid estate tax), holding through a Canadian corporation (complex, with its own US and Canadian tax costs), and life insurance to cover a possible bill. Each has trade-offs that a lawyer and accountant who work on both sides of the border can weigh.
Step by step
- Budget in Canadian dollars: the down payment, closing costs, insurance, property tax and HOA fees, at a cautious exchange rate.
- Choose the financing: a cross-border mortgage, a US lender, a HELOC or cash.
- Apply for an ITIN (IRS Form W-7) if you will need one; it takes several weeks.
- Open a US bank account; cross-border banks can usually do this from Canada.
- Get pre-approved, and work with a US agent who has served Canadian buyers.
- Make an offer (an earnest money deposit is standard), then inspect: home inspection, title search, HOA documents, flood zone and any local checks.
- Close through the title company or a US real estate attorney (required in some states).
- Set up insurance, payments and, if you’re away for months, a property manager or house-watcher.
- Line up a cross-border tax adviser for the US and Canadian filings and an estate lawyer for the US estate tax question.