It’s a great time for Canadians to buy or sell real estate in Naples Florida. The Canadian dollar is now stronger against the US dollar and that means more buying or selling power for Canadians.
How can Canadians buy or sell in the US? Just as the Canada Revenue Agency uses Canadian Social Insurance Numbers (“SINs”) to identify taxpayers, the IRS relies on Social Security Numbers (“SSNs”). A Canadian without U.S. citizenship or work authorization can’t obtain a U.S. SSN but will be required to file a U.S. tax return, so Canadians will need to apply for U.S. Individual Tax Identification Number (“ITIN”) as part of any sale of U.S. property.
Canadians will need to prove both identity and non-U.S. status by either mailing a completed Form W-7 to the IRS or meeting with the IRS at an in-person appointment in the United States.
For Canadians who want to sell Naples Florida real estate, they should be aware of the withholding obligations under the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA allows the IRS to tax non-U.S. persons on the sale or transfer of U.S. real property. Under FIRPTA, the buyer or buyer’s closing agent is the withholding agent and is required to withhold and submit the tax at the time of the closing or sale. When the sale is less than $300,000 USD and the buyer certifies that he or she will use the property as a principal residence for at least the next two years (50% of the days in each year), the withholding is reduced to zero. Withholding at 10% is possible when the buyer certifies that he or she plans to use the property as a principal residence and the sale price is between $300,000 and $1 million USD.
Just to be clear, any transfer of title will initiate the FIRPTA requirement, so for example, when parents add children to the title, that is considered a disposition of property and will trigger FIRPTA. There may be additional tax penalties of up to 40% and then also tax penalties to the Canadian government as well so it’s important to consult an attorney for any and all transfers of property.
We’ve helped numerous Canadians who have decided it’s a great time for Canadians to buy and sell Naples Florida real estate. If you’d like to call us to discuss how we can help you, please call us at 239.293.0246.
Thanks, Mike & Anna Bryant, Downing Frye Realty, Inc.
