Canadian resident has US rental investment income

[Melee]

Hello, 

Please help: how to input the following income to Ufile:   a Canadian resident owns US house, and has US rental income. this client has filed US non resident tax, what should I do to input his Canadian tax? he should have tax credit from the USA, am I correct? thanks

 

[Geo123]

Hello Melee,

To enter the amount of foreign rental income, you have two procedures to perform.

A. First, you must produce a rental income statement form by following these steps:

1. On the "Left side menu of the Interview tab", select "Interview setup".

2. On the right-hand side of the screen, go to the "Rental income" group, check the boxes for "Rental property income" and click "Next" at the bottom of the page.

3. On the "Left side menu of the Interview tab", select "Rental property Income" and on the right-hand side, choose "T776 - Rental income property".

4. Since the building is located outside of Canada, you have 3 choices.

     A) On page "T776 - Rental Property Identification". You can leave the "Address of your rental property" blank, and the program will use your home address of Canada and you may submit your return via NETFILE.

     B) Your second choice, which we favor, in the section "Address of your rental property" you indicate the civic number of the foreign property on the line "Street" and the line "City" you enter the city and state and the country. However, you indicate your province of Canadian residence and your Canadian postal code. You will be able to send by NETFILE.

     C) If you enter the full address of the property in the country where your property is located, you will not be able to submit your return by NETFILE, and then you must mail it to Revenue Canada.

5. Once the information regarding the identification of the property has been entered, click "Next" at the bottom of this page and you will have access to the items "Income, expenses", "Labour costs", "Motor vehicle expenses", "Partners" and "CCA" complete the sections that relate to your situation.

B. Then, as a second operation, you must enter your net rental income and foreign taxes paid in the foreign income section by following these steps:

1. Return to the "Left side menu on the Interview tab", select "Interview setup".

2.  On the right-hand side of the screen, go to the "Investment income and expenses" group, check the boxes for "Foreign income or foreign property (T1135)" and click "Next" at the bottom of the page.

3. Select "Foreign income & property" and in the screen to your right, go to the group "Forein non-business income" click the plus sign "+" icon to the right of the line "Foreign rental income".

4. On the page entitled "Foreign income - rental", if you have foreign taxes paid on foreign rental income that you reported as rental income, enter the net business income on the line "Foreign rental income entered as business income". If applicable, enter the "Amount of foreign tax paid" on this rental income and click "Next" at the bottom of the page.

Form T2209 will be produced by the program and the program will tell you if you are eligible for the federal foreign tax credit. While for residents of Quebec, form TP-772 will be generated by the program and will show you on line 49 the foreign tax credit.

The foreign tax credit will be carried forward by the program to line 40500 of the federal return and line 409 of Schedule E of Quebec, Foreign Tax Credit. In addition, the program will generate federal form T776 - Statement of Real Estate Rentals, as well as form TP-128 - Income and Expenses Respecting the Rental of Immovable Property.

For more information, please consult the following link:

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/rental-income-non-resident-tax.html

Remember, if your foreign property has a value above $100,000 CAN, do not forget to indicate at "CRA questions" and complete the "T1135 Foreign Income Verification Statement".

[Melee]

Great answers. Thanks so much.