A Canadian Buying US Property: the Tax Checklist That Should Run Before Closing — Title, Future Taxes, and the Paperwork That Isn't Needed Yet

The purchase itself is the quiet part: no US federal tax applies to a foreign buyer acquiring US real estate, no ITIN is needed to close, and the closing-table paperwork is title and escrow, not the IRS. What the purchase does is select future regimes, and the checklist exists because every one of them is cheaper to configure at closing than to retrofit. Title, first and most consequential: sole ownership, tenants in common matching contributions, or joint tenancy with right of survivorship — the JTWROS default American title agents suggest carries the cross-border traps the estates coverage details (the US contribution rule can put the full value in the first-dying spouse's estate; Canadian tax sees each owner's share separately), and the clean default for couples is tenants-in-common in contribution proportions with the survivorship goal handled by wills instead of title; entity ownership (the LLC a US advisor will suggest within the first hour) is presumptively wrong for Canadians — the corporation-to-Canada mismatch from the entity playbook — and the holding-structure question for large or rental-heavy purchases deserves its own analysis before, not after, the deed records. Intended use, second: pure personal use enrolls you in nothing annual (no US filings for owning and using your own home — property tax and HOA are the whole recurring bill), while any rental intent triggers the setup sequence the rental article details — the net election, W-8ECI, ITINs, the dual ledger — ideally papered in the first sixty days of renting rather than discovered at the first 1042-S. Funding and currency, third: bring funds documented (US lenders and title companies run source-of-funds checks; the gift-from-parents scenario wants the gift letter from the family-gifting playbook), decide the mortgage question with both countries in view (US financing for Canadians exists through cross-border lenders at modest premiums; the interest is deductible against rental income under the net election but not against personal use for a nonresident — and a mortgage doubles as estate-exposure management per the snowbird estate article), and open the FX plan (the purchase locks a CAD cost base for the eventual Canadian gain computation — the conversion-date records start now). Estate exposure, fourth: the purchase adds a US-situs asset — for most estates a filing-mechanics note rather than a tax problem given the treaty's pro-rated credit, but the sizing exercise belongs in the year of purchase, because the levers (debt structure, ownership design, insurance) price best early. And the administrative spine, fifth: a purchase file (closing statement, deed, improvements log — the basis record both countries will eventually ask for), the property tax and insurance calendar (no escrow means self-managed due dates; and note the homestead-style breaks locals enjoy don't apply to non-resident owners — budget the full millage), the T1135 check (personal-use property is excluded; rental use brings it in at cost once thresholds are met), and the one-page memo of what was decided and why, filed where the eventual seller — you, your executor, or your heirs — will find it.

Key takeaways

• No tax to buy, no ITIN to close: the purchase is a title-and-escrow event; the IRS arrives only with rental income or a sale. Don't let anyone sell you US tax filings for the act of buying.
• Title is the decision that outlives the closing: tenants-in-common by contribution + wills beats reflexive JTWROS for most Canadian couples; LLCs are presumptively wrong; large or complex purchases run the holding-structure analysis first.
• Use selects the regime: personal use = property tax and nothing annual; rental intent = the net-election setup sequence within sixty days of the first tenant; mixed use = the allocation records start at closing.
• Money and mortgage with both countries in view: documented funds and gift letters; cross-border financing priced against its estate-exposure side benefit; the CAD cost base recorded at the purchase-date rate — the number the eventual Canadian gain computation is built on.
• Estate exposure gets sized in year one: a US-situs asset joined the balance sheet — usually a future filing note under the treaty credits, occasionally a planning trigger; the worksheet is cheap now and expensive retroactively.
• The purchase file is the basis file: closing statement, improvements log, conversion records, property tax calendar, T1135 status noted — one folder, maintained, worth real money at sale, death, or audit.

The sixty-day post-closing list

Deed and closing statement filed with the FX conversion noted; wills reviewed against the new asset (the survivorship plan, the executor's future 706-NA note); insurance and property tax calendared with the non-resident rates assumed; if renting — the manager engaged, W-8ECI delivered, ITIN applications started, the election calendared for the first return; if mixed — the personal/rental day log opened; and the one-page memo written. An hour of administration that pre-answers a decade of questions.

Worked example

A Burlington couple closes on a US$650,000 Naples house — winters personal, summers rented. Title: tenants-in-common 60/40 matching their contributions, wills updated the same month to route the survivor outcome (the JTWROS the title agent pre-printed was declined after one phone call). Funding: their own savings plus a C$200,000 gift from her parents, wired with a gift letter — no US reporting for anyone (foreign donor, foreign donees), the letter satisfying the title company's source check. Financing: a 35% cross-border mortgage taken deliberately — partly for FX staging, partly noted in their estate worksheet as nonrecourse-structured debt against the new US-situs asset. Setup for the summer rentals: manager engaged with W-8ECI, ITIN applications filed in month two, the net election calendared for their first 1040-NRs, the dual ledger opened with the purchase-date rate (0.73) recorded as the permanent CAD basis anchor. Estate sizing: worldwide estate well under the exemption — the memo notes "filing mechanics only; revisit at C$10M or law change." Their purchase file holds eleven documents and answers, in advance, the rental audit (year 3), the T1135 question (rental use — reported at cost), and the sale (year 9: FIRPTA managed with an 8288-B, the Canadian gain computed from the 0.73 anchor). Total US tax paid at purchase: zero, exactly as the checklist promised — everything else was configuration, done once, on time.

Official sources

"FDAP income is taxed at a flat 30 percent (or lower treaty rate, if qualify) and no deductions are allowed against such income. ... Effectively Connected Income, after allowable deductions, is taxed at graduated rates." — Internal Revenue Service, Taxation of Nonresident Aliens, https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens

"An ITIN is a 9-digit number the IRS issues if you need a U.S. taxpayer identification number for federal tax purposes, but you aren't eligible for a Social Security number (SSN)." — Internal Revenue Service, Individual Taxpayer Identification Number (ITIN), https://www.irs.gov/individuals/individual-taxpayer-identification-number

Practitioner note

Buying US property is a tax non-event wrapped around five configuration decisions, and our pre-closing call runs the same list every time: title (almost never the pre-printed JTWROS), use (the rental setup sequence if applicable), funding paper, the estate worksheet, and the basis file. The clients who spend one hour before closing skip the three retrofits — the title unwind, the late rental election, the reconstructed basis — that fill everyone else's year three.

See also: For the rules and taxes when an American buys property in Canada, see the rules and taxes when an American buys property in Canada; and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the US purchase configuration — title and holding-structure design, the rental setup sequence where applicable, funding and gift documentation, the estate exposure worksheet, and the basis and compliance file opened at closing. See cross-border pricing or book a call.