Q: We purchased a condo in Florida and plan to rent it out for two or more weeks a year until we retire in 10 years. Do we have to file a U.S. tax return? If so, what deductions can we claim?
—Ursula and Joe B., Pickering , Ont.
A: You aren’t required to file a U.S. tax return. But like wearing sunscreen on the beach in Sarasota, it could be in your best interest. Filing a return may help you get some withholding tax back, says Dean Paley, an accountant and financial planner in Burlington, Ont. “Gross rents are subject to a 30% U.S. withholding tax,” he explains. “Your tenants are required to withhold and remit this tax regardless of their nationality.”
You can claim expenses such as property taxes, condo and management fees, utilities and interest—pretty much all the things rental property owners can claim here. In addition, the U.S. provides a mandatory deduction for depreciation. So while you’ll be taxed on the remaining income, Paley says, “if the tax calculated is less than the amount withheld, you will get a refund.”
If, for some reason, your tenants do not withhold and remit the tax, you have no choice but to file a U.S. return. Once you file that first tax return, you will be required to file a 1040NR in all future years for as long as you own that property.
Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal question? Write to Bruce at firstname.lastname@example.org.