# Canada income as US Citizen



## johntwr2 (Sep 27, 2012)

Hello all,

I am wondering about the legalities and tax consequences of the following scenario:
You are in Canada under a student visa (or you are simply there under the allotted 180 days you're allowed to be there as a US citizen, and then get on the student visa), you are studying in Canada, you are staying in a place that has multiple bedrooms, but you have no roommates. 
You decide to rent out the spare bedrooms to other people, and from this you are earning income in Canada.

Is this even legal? I understand that in most cases you must have a business visa to "work" in Canada. But is this really considered work? Or where exactly does income from property fall under? It is somewhat of my understanding that it doesn't REALLY matter so long as the taxes are paid, but again this is why I am posting here to receive some more experienced input.

So in conclusion the main questions are:
1. What is the legality of this situation if you are NOT on a business visa? Would there actually be any consequences since it isn't like you are working for an employer, plus you would be paying the necessary taxes on said income? 
2. Of course taxes will be paid, would taxes need to be paid in Canada first, and then in the USA, but would you be able to deduct the taxes you paid in Canada?

Thanks for your time


----------



## Bevdeforges (Nov 16, 2007)

I don't know much about Canadian taxes, but I can tell you that as a US citizen, you are expected to file US tax returns and declare your worldwide income, which would include rental income from the arrangement you describe.

Rental income is considered "unearned" income and so is not subject to the FEIE - so yes, you would have to offset any US taxes due with the amount of income tax you pay in Canada on the income.
Cheers,
Bev


----------



## robnw (Jul 18, 2012)

johntwr2 said:


> Hello all,
> 1. What is the legality of this situation if you are NOT on a business visa? Would there actually be any consequences since it isn't like you are working for an employer, plus you would be paying the necessary taxes on said income?
> 2. Of course taxes will be paid, would taxes need to be paid in Canada first, and then in the USA, but would you be able to deduct the taxes you paid in Canada?


First let me put my hand up and say I'm not Canadian qualified, but my colleagues are - see the cross border planning site link, and the US-Canadian books offered there.
Second, I'd expect to see in the conditions for the Canadian visa some upper limit on the amount of money a student can earn in Canada without violating the visa: you'd have to look this up. This is not a tax treaty issue, but a visa one. It is possible that the limit applies only to earned income.
Ans 1. Look it up but initially one expects no problem if it's one house rented, and obviously linked to your studies. Consequences: Canadian law on tenancies: Canadian tax return: more entries on your 10-40.
Ans 2. yes, maybe, as for deduction my starter view is that the US/Canadian Treaty says that income from property is taxed only in Canada - but if that fails, then yes.
Third, this isn't anything more than 'best guess' over my morning cappuccino: I haven't even opened a book. You will have to look it up. 

http://www.irs.gov/pub/irs-pdf/p597.pdf


----------



## chrisgale200 (Sep 8, 2012)

No idea.. but would love to know as my cousin is going to canada.


----------

