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CSA TRAVEL INFORMATION GUIDE
As this is a mathematical calculation based on travel over three consecutive years, it is acceptable
to have a total score higher than 183 provided you did not spend more than your allowed visiting
time in the U.S. in any one single year (182 days per year as a Canadian citizen, 90 days per year as a
Canadian permanent resident).
W8-BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding
Canadian residents who have investments and/or interest-paying accounts with a financial institution
in the U.S. should complete formW8-BEN Certificate of Foreign Status. This form is a withholding tax
exemption certificate that your financial institution must keep on file to explain to the IRS why they
did not withhold any bank interest paid to you, or conversely did not issue you the U.S. equivalent of
a Canadian T5 income tax slip.
As Canadian residents are aware, interest earned on investments or bank accounts (regardless of how
small) is considered a form of taxable income when completing each year’s Canadian income tax
return. Canadian banks are required to withhold 30% (the maximum income tax rate) of any interest
they pay to non-Canadians on their Canadian bank accounts because non-Canadians rarely receive T5
slips or complete a Canadian income tax return. Non-Canadians must, in turn, complete a Canadian
income tax return in order to receive any refund.
The same situation exists in the U.S. for financial institutions paying interest earned on the accounts
of Canadians (foreigners). Unlike form 8840 (Closer Connection) which is sent directly sent to the IRS
each year, formW8-BEN is kept on file by the financial institution for IRS audit purposes, and is valid
for up to three years.
Do you hold foreign property?
If at any time in the tax year you had foreign property with a total cost of more than $100,000 CAD,
special Canadian tax rules may apply to you. If applicable, refer to the Canada Revenue Agency (CRA)
income tax guide or speak with your tax preparer.
At the same time, as was discussed earlier, rental income is not effectively connected in the United
States. If you rent out your U.S.-based property, you should be aware that a withholding tax of 30%
normally applies to the gross amount of any rent paid whether you are physically in the United States
or back in Canada at the time of the payment. Unlike withholding taxes on interest and dividends,
this tax is not reduced by the Canada-U.S. tax treaty.
One way to possibly avoid the 30% gross withholding tax is to file a U.S. tax return and elect to pay
tax on net rental income. In this case, you may be eligible to receive a refund for any taxes withheld,
to the extent of the withholding amount exceeds the tax payable.
Under the U.S. Internal Revenue Code, you can elect to treat rental income as income that is effectively
connected with the conduct of a U.S. trade or business. If you make this election, you are taxed on the
net income. You can claim expenses related to owning and operating the rental property during the
rental period, including a mandatory depreciation charge.
To make this election, you need to file a U.S. income tax return form 1040NR U.S. Nonresident Income
Tax Return along with letter stating:
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Location(s) of all of your real estate property in the United States
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The extent of your ownership in the property