U.S. Estate Tax for Canadians: U.S. Property at Death
Which U.S. assets are taxed at death, the US$60,000 threshold, the treaty's prorated credit, and the Canadian side
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
A Canadian who dies owning U.S.-situs property — U.S. real estate and shares of U.S. corporations — may owe U.S. estate tax, and the estate files Form 706-NA if those assets exceed US$60,000. The treaty's prorated unified credit means most Canadians owe nothing; wealthier estates with U.S. property can.
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What's U.S.-situs property
| U.S.-situs | Not U.S.-situs |
|---|---|
| U.S. real estate (a Florida condo) | Shares of Canadian corporations (even if they hold U.S. assets — including Canadian-listed ETFs of U.S. stocks) |
| Shares of U.S. corporations (U.S. stocks, U.S.-listed ETFs, and U.S. mutual funds, even in a Canadian brokerage account) | U.S. bank deposits not connected with a U.S. business |
| U.S. business assets | Most U.S. debt obligations (bonds whose interest is exempt portfolio interest, including U.S. Treasuries) |
| Tangible property located in the U.S. | Life insurance proceeds on the Canadian's life |
The treaty's credit
The treaty (Article XXIX-B) gives the estate a unified credit equal to the U.S. citizen's credit multiplied by the ratio of U.S.-situs assets to the worldwide estate — so the exemption shrinks as the worldwide estate grows (for 2026 the citizen's exclusion is US$15 million under the 2025 federal tax law, P.L. 119-21 — a credit of US$5,945,800 — and the estate always gets at least the US$13,000 nonresident credit). A marital credit of up to the same amount (Article XXIX B(3)) can apply for property passing to a surviving spouse if the executor elects it and waives the QDOT marital deduction, and if the worldwide estate is US$1.2 million or less, Article XXIX B(8) limits the tax to U.S. real estate and U.S. business property — U.S. stocks escape it. The estate must file Form 706-NA (within nine months, extendable) and disclose the worldwide estate to claim the treaty credit.
The Canadian side
Canada taxes the deceased's deemed disposition of capital property at death on the final return (the inheritance guide), and Article XXIX B(6) credits U.S. estate tax on U.S.-situs property against the Canadian tax on U.S.-source gains in the year of death (such as on U.S. real estate) — and, if the worldwide estate exceeds US$1.2 million, on gains from other U.S.-situs property such as U.S. shares.
Planning
Common approaches: holding U.S. stocks through a Canadian corporation (the Canadian corporation with U.S. investment income guide), Canadian-domiciled funds instead of U.S.-listed ones, non-recourse mortgages on U.S. real estate (only the equity counts in the U.S. estate, whereas recourse debt is deductible only pro rata), and joint ownership or trust planning for a Florida property.
Frequently asked questions
Do Canadians pay U.S. estate tax?
Only on U.S.-situs property, and the treaty's prorated credit eliminates the tax for most estates.
What counts as U.S. property for estate tax?
U.S. real estate and shares of U.S. corporations — including U.S. stocks held in a Canadian account.
Do I need to file if no tax is owed?
Yes, if U.S.-situs assets exceed US$60,000 — to claim the treaty credit.
Does Canada give a credit for U.S. estate tax?
Yes, against the Canadian tax on the same property's deemed gain, within limits.
Official sources
The IRS explains: “An executor for a nonresident, not a citizen of the U.S. must file an estate tax return, Form 706-NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States, if the fair market value at death of the decedent's U.S.-situated assets exceeds $60,000.” — Internal Revenue Service, Some nonresidents with U.S. assets must file estate tax returns, https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns
The IRS explains: “If you are a U.S. citizen or green card holder living in Canada, you still have to file a Form 1040 and report your worldwide income because of the "saving clause" in Article XXIX(2), which allows the United States to tax its citizens and residents as if the treaty had not entered into effect.” — Internal Revenue Service, Publication 597 (10/2015), Information on the United States–Canada Income Tax Treaty, https://www.irs.gov/publications/p597
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk and Canadian Tax Desk handle U.S. estate tax planning for Canadians with U.S. property — situs analysis, treaty credit projections, Form 706-NA filings, and coordination with the Canadian deemed disposition. See pricing or book a call.
Cross-border taxes, handled in one place
U.S. and Canadian filings prepared together by our U.S. and Canadian Tax Desks.
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