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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?

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I dont think so

Submitted: 8 months ago.Category: Tax
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9/13/2017
Tax Professional: Lev, Tax Advisor replied 8 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,860
Experience: Taxes, Immigration, Labor Relations
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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.

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Customer reply replied 8 months 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?
Tax Professional: Lev, Tax Advisor replied 8 months 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.

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