Do I Need To File A U.S. Income Tax return If I Rent Out My U.S. Vacation Property?
If a Canadian (U.S. non-resident) individual rents out their U.S. vacation property for 15 days or more then they may have to file a U.S. income tax return to report the rental activity.
A non-resident owner is required to pay a specified percentage (30%) of the gross rents received on account of withholding tax. Although not required, the non-resident will normally engage a U.S. agent to collect the rents and remit the withholding tax to the IRS on their behalf. If the appropriate withholding is made then the non-resident should have no further income tax filing requirements.
However, in cases where there are significant rental expenses (such as mortgage interest, property taxes, management fees, etc.) the 30% withholding tax obligation may constitute a hardship to the nonresident owner. Accordingly, the IRS has provisions that allow a nonresident property owner to make a “net rental election” and be subject to tax at the graduated tax rates rather than the flat 30% withholding rate. This “net rental election” can be made by attaching a statement to the U.S. income tax return (Form 1040NR).
If the “net rental election” method is chosen, the individual owner should notify the U.S. agent that the 30% withholding is not required by providing the U.S. agent with a completed Form W-8ECI “Certificate of Foreign Person’s Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States”.
http://www.wolrigemahon.com/tax-implications-canadian-owning-u-s-vacation-property/
