Avoid double taxation while flipping in Baltimore but residing in Canada
Investor · Baltimore, MD · Member since 2023 · 13 posts · 5 votes
Avoid double taxation while flipping in Baltimore but residing in Canada
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Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
2yQuote from @Gustavo R.:
Hello guys! Glad to be part of this community.
I live in Toronto, Canada but I'm starting my first flip now at the end of September in Baltimore/MD, closing is September 20th. The reason why I decided on Baltimore is because my friend-partner lives there and he had done 20+ flips in the last 3-4 years. I have a few questions and need guidance from people more experienced than me.
Can I be double-taxed by the USA (IRS) and CANADA (CRA) when doing my flips or holding rental properties in the USA while living in CANADA? If yes, is there a way to avoid being double-taxed without the need to move to the US?
It seems the US has more tax benefits in Real Estate than Canada (I'm not sure) - How can I take advantage of it while residing in Canada?
Any recommendations of CPA that are familiar with that type of scenario I described above?
And last thing, my LLC has EIN but I don't have ITIN - I'll be physically in Baltimore in few days. Is it possible to open a bizz bank account without ITIN?
Thank you
Gustavo
Your first mistake was setting this up before getting the proper cross border tax advice. You will get double taxed using an LLC, unless your partner is a majority holder (ie.51%) then there may be a possibility of avoiding this.
Reach out to @Elliott Milek he might be able to help
18 Replies
- Calgary, AB · Member since 2021 · 327 posts · 176 votes2y
Quote from @Gustavo R.:
Hello guys! Glad to be part of this community.
I live in Toronto, Canada but I'm starting my first flip now at the end of September in Baltimore/MD, closing is September 20th. The reason why I decided on Baltimore is because my friend-partner lives there and he had done 20+ flips in the last 3-4 years. I have a few questions and need guidance from people more experienced than me.
Can I be double-taxed by the USA (IRS) and CANADA (CRA) when doing my flips or holding rental properties in the USA while living in CANADA? If yes, is there a way to avoid being double-taxed without the need to move to the US?
It seems the US has more tax benefits in Real Estate than Canada (I'm not sure) - How can I take advantage of it while residing in Canada?
Any recommendations of CPA that are familiar with that type of scenario I described above?And last thing, my LLC has EIN but I don't have ITIN - I'll be physically in Baltimore in few days. Is it possible to open a bizz bank account without ITIN?
Thank you
Gustavo
There is a tax treaty between Canada and US, so you probably will not be paying double taxes. But you will be paying the higher tax rate, since Canada is higher usually there will be a top up.
- 2yJoshua ThompsonBusiness MemberAccountant · Melissa, TX (Remote) · Member since 2017 · 210 posts · 135 votes
Hi Gustavo,
Welcome!! This is a very technical question and most tax advisors might be hesitant to address it here not because they don't know but because it requires quite a bit of additional information. I personally don't work with clients in Canada but would highly recommend someone who works with clients in Canada and US. I wish I had a referral but they aren't taking clients at the moment.
A US/Canada tax treaty might exist that will prevent "double taxation".
If you're unable to find someone here or at all let me know I can reach out to a few colleagues that might have a recommendation.
Thompson Tax Group LLC550 Reviews - Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes2y
Youre going to have some complicated tax issues. USA, Canada, FIRPTA and Maryland out of state withholding issues. You definitely need a tax pro.
District Invest Group546 Reviews - 2yAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
@Gustavo R. Yes, you can be double-taxed by both the U.S. (IRS) and Canada (CRA) on your flip in Baltimore, but you can avoid this by using the Canada-U.S. Tax Treaty, which allows you to claim a foreign tax credit on your Canadian return for taxes paid to the U.S. The U.S. offers real estate tax benefits like depreciation and favorable capital gains rates, which you can leverage while residing in Canada by structuring your investments properly.
For opening a U.S. business bank account, you can use your LLC's EIN, but some banks may still require an ITIN, so check with local banks in Baltimore.
INVESTOR FRIENDLY CPA®5241 Reviews - Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes2y
Hey Gustavo,
The double taxation issue will likely be experienced by someone in your situation without the proper tax professional involved. I would look into if it would be possible for you to qualify as a nonresident alien for tax purposes. Do you have income coming in from Canada as well or is this flipping operation your only source of income? Double taxation could come from both ways if your not careful.
- Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes2y
Quote from @Gustavo R.:
Hello guys! Glad to be part of this community.
I live in Toronto, Canada but I'm starting my first flip now at the end of September in Baltimore/MD, closing is September 20th. The reason why I decided on Baltimore is because my friend-partner lives there and he had done 20+ flips in the last 3-4 years. I have a few questions and need guidance from people more experienced than me.
Can I be double-taxed by the USA (IRS) and CANADA (CRA) when doing my flips or holding rental properties in the USA while living in CANADA? If yes, is there a way to avoid being double-taxed without the need to move to the US?
It seems the US has more tax benefits in Real Estate than Canada (I'm not sure) - How can I take advantage of it while residing in Canada?
Any recommendations of CPA that are familiar with that type of scenario I described above?And last thing, my LLC has EIN but I don't have ITIN - I'll be physically in Baltimore in few days. Is it possible to open a bizz bank account without ITIN?
Thank you
Gustavo
Your first mistake was setting this up before getting the proper cross border tax advice. You will get double taxed using an LLC, unless your partner is a majority holder (ie.51%) then there may be a possibility of avoiding this.
Reach out to @Elliott Milek he might be able to help
- Investor · Baltimore, MD · Member since 2023 · 13 posts · 5 votes2y
Thank you! I've sent an invite to Elliot but I don't how active he is in here. Would you mind sharing his contact information on my private?
- Investor · Baltimore, MD · Member since 2023 · 13 posts · 5 votes2y
Quote from @Stevo Sun:
Quote from @Gustavo R.:
Hello guys! Glad to be part of this community.
I live in Toronto, Canada but I'm starting my first flip now at the end of September in Baltimore/MD, closing is September 20th. The reason why I decided on Baltimore is because my friend-partner lives there and he had done 20+ flips in the last 3-4 years. I have a few questions and need guidance from people more experienced than me.
Can I be double-taxed by the USA (IRS) and CANADA (CRA) when doing my flips or holding rental properties in the USA while living in CANADA? If yes, is there a way to avoid being double-taxed without the need to move to the US?
It seems the US has more tax benefits in Real Estate than Canada (I'm not sure) - How can I take advantage of it while residing in Canada?
Any recommendations of CPA that are familiar with that type of scenario I described above?And last thing, my LLC has EIN but I don't have ITIN - I'll be physically in Baltimore in few days. Is it possible to open a bizz bank account without ITIN?
Thank you
Gustavo
There is a tax treaty between Canada and US, so you probably will not be paying double taxes. But you will be paying the higher tax rate, since Canada is higher usually there will be a top up.
Because of the tax benefits in the US for those who invest in real estate. Isn't it possible to declare in the US (pay the taxes there) instead of declaring in Canada where I live? Well, I think I can deduct a lot more things in the US.
And in Canada I say that everything has already been declared in the US.
- Investor · Baltimore, MD · Member since 2023 · 13 posts · 5 votes2y
Quote from @Ashish Acharya:
@Gustavo R. Yes, you can be double-taxed by both the U.S. (IRS) and Canada (CRA) on your flip in Baltimore, but you can avoid this by using the Canada-U.S. Tax Treaty, which allows you to claim a foreign tax credit on your Canadian return for taxes paid to the U.S. The U.S. offers real estate tax benefits like depreciation and favorable capital gains rates, which you can leverage while residing in Canada by structuring your investments properly.
For opening a U.S. business bank account, you can use your LLC's EIN, but some banks may still require an ITIN, so check with local banks in Baltimore.
Thanks for the answer. What do you mean by structuring your investments properly?
- Investor · Baltimore, MD · Member since 2023 · 13 posts · 5 votes2y
Quote from @Account Closed:
Hey Gustavo,
The double taxation issue will likely be experienced by someone in your situation without the proper tax professional involved. I would look into if it would be possible for you to qualify as a nonresident alien for tax purposes. Do you have income coming in from Canada as well or is this flipping operation your only source of income? Double taxation could come from both ways if your not careful.
I have another source of income in Canada, but it is not related to real estate or my LLC in Maryland.
- Investor · Baltimore, MD · Member since 2023 · 13 posts · 5 votes2y
Quote from @Chad U.:
Quote from @Gustavo R.:
Hello guys! Glad to be part of this community.
I live in Toronto, Canada but I'm starting my first flip now at the end of September in Baltimore/MD, closing is September 20th. The reason why I decided on Baltimore is because my friend-partner lives there and he had done 20+ flips in the last 3-4 years. I have a few questions and need guidance from people more experienced than me.
Can I be double-taxed by the USA (IRS) and CANADA (CRA) when doing my flips or holding rental properties in the USA while living in CANADA? If yes, is there a way to avoid being double-taxed without the need to move to the US?
It seems the US has more tax benefits in Real Estate than Canada (I'm not sure) - How can I take advantage of it while residing in Canada?
Any recommendations of CPA that are familiar with that type of scenario I described above?And last thing, my LLC has EIN but I don't have ITIN - I'll be physically in Baltimore in few days. Is it possible to open a bizz bank account without ITIN?
Thank you
Gustavo
Your first mistake was setting this up before getting the proper cross border tax advice. You will get double taxed using an LLC, unless your partner is a majority holder (ie.51%) then there may be a possibility of avoiding this.
Reach out to @Elliott Milek he might be able to help
For this flip property - who holds the contract is my partner's LLC I do not have shares. Nothing in mine yet because I'm still preparing myself to open an US bank account but the banks I saw online requested ITIN which I don't have.
- Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes2yI just DM'd the contact info for Elliott.
Quote from @Gustavo R.:
Quote from @Chad U.:
Quote from @Gustavo R.:
Hello guys! Glad to be part of this community.
I live in Toronto, Canada but I'm starting my first flip now at the end of September in Baltimore/MD, closing is September 20th. The reason why I decided on Baltimore is because my friend-partner lives there and he had done 20+ flips in the last 3-4 years. I have a few questions and need guidance from people more experienced than me.
Can I be double-taxed by the USA (IRS) and CANADA (CRA) when doing my flips or holding rental properties in the USA while living in CANADA? If yes, is there a way to avoid being double-taxed without the need to move to the US?
It seems the US has more tax benefits in Real Estate than Canada (I'm not sure) - How can I take advantage of it while residing in Canada?
Any recommendations of CPA that are familiar with that type of scenario I described above?And last thing, my LLC has EIN but I don't have ITIN - I'll be physically in Baltimore in few days. Is it possible to open a bizz bank account without ITIN?
Thank you
Gustavo
Your first mistake was setting this up before getting the proper cross border tax advice. You will get double taxed using an LLC, unless your partner is a majority holder (ie.51%) then there may be a possibility of avoiding this.
Reach out to @Elliott Milek he might be able to help
For this flip property - who holds the contract is my partner's LLC I do not have shares. Nothing in mine yet because I'm still preparing myself to open an US bank account but the banks I saw online requested ITIN which I don't have.
In this case, your partner can send you the profits/funds and then issue a 1099NR. I hope you have a strong relationship and trust with this partner, or have some sort of lien against the property to protect your interest.
But I highly suggest getting advice in setting up your own entity. If done improperly, you may not be privy to any Foreign Tax Credits paid in the US when you declare that income in Canada. - 2yLinda LabbePro MemberInvestor · North Bay, Ontario · Member since 2015 · 709 posts · 262 votes
HI we live in Canada and have sone both without double taxes. more then willing to chat and explain how
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
I know this wasn't your question but I have to ask... I'm curious how you will flip in Baltimore from Canada. Is your friend that lives there going to be your PM? Will you be onsite at all or entirely remote?
- Investor · Baltimore, MD · Member since 2023 · 13 posts · 5 votes2y
Quote from @Nicholas L.:
I know this wasn't your question but I have to ask... I'm curious how you will flip in Baltimore from Canada. Is your friend that lives there going to be your PM? Will you be onsite at all or entirely remote?
My wife isn't happy but 2 weeks in Baltimore and 2 weeks in Toronto. 2:30h flight or 9h driving. My partner moved to Orlando last month but he will be flying there to visit as well.
Will be my first time doing it, wish me the best of luck. - Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes2y
Quote from @Gustavo R.:
Quote from @Account Closed:
Hey Gustavo,
The double taxation issue will likely be experienced by someone in your situation without the proper tax professional involved. I would look into if it would be possible for you to qualify as a nonresident alien for tax purposes. Do you have income coming in from Canada as well or is this flipping operation your only source of income? Double taxation could come from both ways if your not careful.
I have another source of income in Canada, but it is not related to real estate or my LLC in Maryland.
Understood. You need to ensure you don't get into a situation where the US is taxing your worldwide income, though in CA there are tax credits to avoid double tax its still not ideal
- 1yLauren CohenPro MemberAttorney · Boca Raton, FL & Toronto · Member since 2020 · 49 posts · 10 votes
Quote from @Stevo Sun:
Quote from @Gustavo R.:
Hello guys! Glad to be part of this community.
I live in Toronto, Canada but I'm starting my first flip now at the end of September in Baltimore/MD, closing is September 20th. The reason why I decided on Baltimore is because my friend-partner lives there and he had done 20+ flips in the last 3-4 years. I have a few questions and need guidance from people more experienced than me.
Can I be double-taxed by the USA (IRS) and CANADA (CRA) when doing my flips or holding rental properties in the USA while living in CANADA? If yes, is there a way to avoid being double-taxed without the need to move to the US?
It seems the US has more tax benefits in Real Estate than Canada (I'm not sure) - How can I take advantage of it while residing in Canada?
Any recommendations of CPA that are familiar with that type of scenario I described above?And last thing, my LLC has EIN but I don't have ITIN - I'll be physically in Baltimore in few days. Is it possible to open a bizz bank account without ITIN?
Thank you
Gustavo
There is a tax treaty between Canada and US, so you probably will not be paying double taxes. But you will be paying the higher tax rate, since Canada is higher usually there will be a top up.
- 1yLauren CohenPro MemberAttorney · Boca Raton, FL & Toronto · Member since 2020 · 49 posts · 10 votes
It is essential to have the proper entities set up to avoid double-taxation. An LLC on its own is not going to accomplish your goals as the CRA considers LLC's to be "disregarded entities". Let us know if we can assist you.
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