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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29919
Experience:  Taxes, Immigration, Labor Relations
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I have a tax question, I am a US Tax resident with a Home in

Customer Question

I have a tax question
JA: The Expert will know how to help. Please tell me more, so we can help you best.
Customer: I am a US Tax resident with a Home in USA. I have a rental property where I earn rfental income in Canada. If I see the rental property, what is the tax implication in USA tax filing. Is it Capital gains or Ordinary income and what is the tax rate for 2017?
JA: Is there anything else the Expert should be aware of?
Customer: i dont think so
Submitted: 1 month ago.
Category: Tax
Expert:  Lev replied 1 month ago.

Several issues...

- as you are US resident - all your worldwide income is reported on your US tax return;

- that includes your Canadian rental income regardless if that income is taxed in Canada or not.

- you will be able to deduct rental expenses against your rental income - these calculations are done on schedule E attached to your US tax return;

-- and only net rental income will be added to your other taxable income

- net rental income is taxed as ordinary income;

-- you would realize capital gain if you sell rental property.

- US tax rate are based on TOTAL income, filing status, deductions, etc; there is no separate tax rate for rental income;

-- you may review 2017 tax rate schedule here

https://taxfoundation.org/2017-tax-brackets/

- in additional - if the same income is taxed in the US and in Canada - you will be able to claim a foreign tax credit - thus effectively will avoid double taxation of the same income.

Questions?

Customer: replied 1 month ago.
I disclose the net rental income from Canada in my US tax return. I am plannning to sell it in 2017. Is it capital gains and how much is the cap gains tax rate in 2017? Is the cap gains tax lower in 2018?
Expert:  Lev replied 1 month ago.

In the US - there is a different treatment for capital gains comparing to Canada...

First of all the term "capital gain tax" is referred to INCOME tax on capital gain - that is not a separate tax,

But when the property was owned more than a year - the gain is taxed at reduced long term capital gain tax rates - that are based on your total income, filing status, etc - and may be zero, 15% or 20%.

So far - same tax rates are in 2017 and in 2018 - while there is a discussion regarding tax reform - I would not expect any changes soon - but normally tax brackets are slightly adjusted for inflation.

If you provide your other income, filing status and expected gain on that sale - I may estimate your possible tax liability.