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What do I need to file taxes on a property sale in Canada? 25% tax already paid.

Not a rental property just land.

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New Member

What do I need to file taxes on a property sale in Canada? 25% tax already paid.

You may need to include this sale on a US federal income tax return.

Yes, if you are a US citizen or resident. This is because US citizens and residents are taxed on worldwide income.

No, if you are a nonresident alien. Click this link for more information from the IRS on US Tax Guide for Aliens

If you are a US citizen or resident, you will need to report this transaction (in USD) as the sale of a capital asset.

The Internal Revenue Service has no official exchange rate. In general, use the exchange rate prevailing (i.e., the spot rate) when your NRA spouse received the income. Please refer to the following IRS links for more information about Foreign Currency and Currency Exchange Rates and Yearly Average Currency Exchange Rates

The sale of bare land is considered an investment and the sale is treated as the sale of a capital asset. (However, no capital loss will be allowed on the sale of land that was or would have been used for your primary personal residence) 

Click this link for further information about reporting the sale of a capital asset

To enter a capital gain or loss on investment land in TurboTax, log into your tax return and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information (see step 6 below) 

Alternatively, to enter your sale of land  transaction in TurboTax Online or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
  3. Next click on “I’ll choose what I work on” (jump to full list)
  4. Scroll down the screen until to come to the section “Investment Income”
  5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
  6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
  7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
  8. Choose type of investment you sold - select Land
  9. Some basic information:
    1. Description –  Usually the address of the property sold
    2. Sales Proceeds – Net proceeds from the sale  (If your 1099-S doesn't include selling expenses, click to add selling expense here (even though it said 1099-B, add additional selling expenses here)
    3. Date Sold – Date you sold the property
  10. Tell us how you acquired the property - purchased
  11. Any business or rental use? - if no, then select personal use only
  12. Some Basis information
    1. Date Acquired
    2. Original cost basis
    3. Cost of improvements (Add these to Original basis screen information

Since you paid foreign taxes on the this transaction, you will be allowed an offset for these foreign taxes on your US tax return.  If you take a foreign tax credit, your US tax liability will be reduced by the amount of taxes that you would have paid if the transaction took place in the US (see this link Claim Foreign Tax Credit). If you take a foreign tax deduction on Schedule A, you will be allowed to deduct the full amount of the foreign taxes paid but you will need to itemize (which could limit your ability to take the full deduction). The TurboTax software will help you determine which of these options will lower your overall tax liability.

Please note : If you have foreign bank accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or resident and:

  1. you had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

To be directed to the US Treasury Government Website to prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)

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