6 Things Every Canadian Should Know Before Selling Property in the United States

For many Canadians, owning real estate in the United States is common- whether it’s a vacation condo, a rental property, or a long-term investment. But when it comes time to sell, the process can feel complicated. From US capital gains tax and cross-border reporting to currency conversion, several steps directly affect how much you actually bring home.

This guide breaks down what happens when a Canadian sells property in the US and explains the key tax implications for Canadians owning US property. We’ll also look at practical considerations like FIRPTA withholding, state-level rules, and how to prepare your property for sale. Most importantly, we’ll highlight how having a clear FX strategy ensures that once the paperwork is complete, you maximize the value of your proceeds when transferring them back to Canada.

1. Expect a US capital gains tax when selling property in the US

When Canadians sell US property, the first thing to know is that the United States taxes the gain before Canada. This means you’ll need to report the sale to the IRS by filing a US Non-Resident Income Tax Return (Form 1040-NR). Even though you’re a Canadian resident, the IRS has the first right to tax the gain.

For instance, if you purchased a Florida condo for $300,000 and sell it for $400,000, the $100,000 profit is taxable in the US.

Capital gains tax rates in the US

• Long-term ownership (over 1 year): Gains are typically taxed at preferential capital gains rates, 0%, 15%, or 20%, depending on your income bracket.
• Short-term ownership (under 1 year): Profit is treated like regular income and taxed at higher US income tax rates.

This distinction is important for Canadian residents selling US property, as a long-term hold generally means less tax compared to a quick sale.

Filing requirements and identification numbers

To file with the IRS, you’ll need an Individual Taxpayer Identification Number (ITIN) if you don’t already have one. This is different from your Canadian SIN and acts as your US tax ID. It’s smart to apply for this early in the selling process to avoid delays when your tax return is due.

State taxes may also apply

Beyond federal rules, some US states add their own taxes on real estate sales. If your property is in a no-income-tax state like Florida, you may not be subject to additional state taxes. But in places like California or New York, Canadians selling US property should be prepared for state tax filings as well.

Once taxes are filed and paid, you’ll want to think ahead about selling US property and repatriating funds to Canada. How much you actually keep will depend not only on taxes, but also on currency exchange. Using tools like the currency converter or live exchange rates can help you plan before transferring funds.

2. Report the sale in Canada – and avoid double taxation

When Canadians sell US property, the Canada Revenue Agency (CRA) expects the sale to be reported on their Canadian tax return. Canadian residents must report worldwide income, including the sale of foreign property. Even though the US has the first right to tax the gain, you still need to declare the sale in Canada.

The Canada–US tax treaty benefit

The good news is that you won’t pay tax on the same gain twice. Due to the Canada–US tax treaty, Canadians can claim a foreign tax credit for the US taxes already paid. In practice, you’ll add the gain to your Canadian return, then claim a credit for US tax already paid. This usually means you only pay whichever country’s rate is higher. For example, if the US tax rate were 15% but your Canadian rate is 20%, you would just pay the 5% difference to the CRA.

How Canada calculates the gain

Canada taxes only 50% of a capital gain, but there’s an important detail: the CRA requires you to calculate everything in Canadian dollars. This means exchange rates can change the size of your gain on paper.

For example, selling US property when the Canadian dollar is weaker, your proceeds may be higher once converted, increasing the taxable gain. Many snowbirds are caught by this when selling property abroad and bringing money to Canada.

Why planning your exchange matters

Since exchange rates directly affect the taxable gain, timing the conversion of your US proceeds can make a noticeable difference. Working with a foreign exchange specialist like MTFX helps you secure competitive rates and avoid unnecessary costs from bank spreads. We provide large money transfer services for selling US property, with transparent pricing and better-than-bank rates, so you keep more when bringing your proceeds back to Canada.

Taxes across two countries can be complex, and it’s important to stay on top of the rules to avoid mistakes. For Canadians selling property abroad and bringing money to Canada, having the right FX strategy with MTFX provides peace of mind that your proceeds are handled efficiently and cost-effectively when repatriating funds. With MTFX, you can also check live exchange rates to understand the market and choose the right time to transfer. Check the widget below and get real-time exchange rates.

3. Know the FIRPTA withholding rules

Why Canadians need to understand FIRPTA

One of the biggest surprises for Canadians selling US property is the Foreign Investment in Real Property Tax Act (FIRPTA). This US law requires the buyer to hold back a portion of the sale price and send it to the IRS. The standard amount is 15% of the total sale price, not just the profit. This functions as a prepayment of your U.S. taxes, not an additional tax.

Example: Selling a US property for $500,000 would mean $75,000 is withheld at closing. Later, if your actual US tax comes to $50,000, you’ll get a $25,000 refund once you file your return.

Exceptions and reduced rates

Not every sale triggers the full 15%:

• Small property sales: If the sale price is under $300,000 and the buyer plans to live in the home, no FIRPTA withholding is required.
• Mid-range sales ($300k–$1M): With a property the buyer intends to occupy as a residence, the withholding drops to 10%.
• Standard case: Above $1M or non-residential purchases, the full 15% applies.

These rules are especially relevant for Canadian residents selling US property, such as vacation condos or snowbird homes.

Withholding certificates for large sales

If 15% is much more than your expected tax, you can apply for a Withholding Certificate from the IRS (Form 8288-B). This lets you request a lower withholding based on the actual gain. While it requires planning ahead, it helps free up more of your funds at closing instead of waiting months for a refund.

Managing your money after FIRPTA

For many sellers, FIRPTA can temporarily tie up a significant portion of your proceeds. That’s why it’s smart to plan your next steps early, especially if you’re selling property abroad and bringing money to Canada. Once the IRS clears the funds, you’ll still need to convert them from USD to CAD.

This is where MTFX adds real value. As a FINTRAC-regulated provider, we ensure your transfers are fully compliant and cost-effective. Instead of losing thousands to poor bank exchange rates, your transfers are processed at mid-market rates with no hidden charges. If you’re preparing to move your proceeds back, you can also consider whether to retain some funds in USD to cover ongoing US expenses, or convert directly to CAD.

4. Planning ahead and other rules Canadians should know

Why early preparation matters

When it comes to Canadians selling US property, timing is everything. Having your documents ready, such as your ITIN and IRS forms, means fewer delays when closing. It also helps avoid long waits for refunds if funds are withheld under FIRPTA.

State-level tax implications

The tax implications for Canadians owning US property don’t stop at the federal level. Each state sets its own tax rules on property sales:

• No tax states – Florida and Texas generally don’t impose state capital gains tax.
• Taxed states – California, Hawaii, New York, and Arizona often add their own tax or withholding. For example, California withholds 3.33% and Hawaii applies 7.25% for non-residents.
• Administrative rules – Certain states do not accept Canadian notarizations for closing documents, requiring notarization at a US consulate or embassy instead.

This illustrates the additional state-level obligations Canadians may face when selling property in the United States.

Other costs to plan for

Taxes aren’t the only expense when Canadians sell US property. There are other costs that can affect how much you actually take home:

• Real estate commissions – Most US property sales involve working with an agent, and commissions typically range from 5–6% of the sale price. On a $400,000 sale, this could mean $20,000–$24,000 deducted right away.
• Legal or closing fees – Title companies, escrow services, and lawyers charge fees to process the transaction. These can add up to several thousand dollars, depending on the state and complexity of the deal.
• Local transfer or stamp duties – Certain counties and municipalities apply transfer taxes on property sales. While the amounts vary, it’s another expense that reduces your final proceeds.

Factoring in these costs alongside federal and state taxes gives you a realistic picture of your net proceeds. 

Bringing it all together

For Canadian residents selling American property, planning ahead is about more than just filing tax forms. It means knowing what federal and state rules apply, what paperwork is needed, and how much you’ll actually bring home after costs. However, once those proceeds are ready, selling property abroad and bringing money to Canada becomes the final step.

5. Preparing your US property for a successful sale

We’ve covered the tax rules, regulations, and the costs that come with selling US real estate. But for Canadian residents selling US property, there’s another part of the process that can make just as big a difference: how well the property itself is presented to potential buyers. A well-staged home not only attracts more interest but can also increase the final selling price.

Declutter and depersonalize

Buyers want to imagine themselves in the space. Removing personal items, excess furniture, and clutter allows rooms to feel more open and inviting. For Canadians selling US property, this step is especially important when you’re not living there full-time, as homes can easily accumulate unused items or seasonal items.

Invest in cleaning and lighting

First impressions matter. A deep clean, fresh paint where needed, and good lighting can transform how a home feels during viewings. Natural light, in particular, makes spaces look larger and more welcoming. Simple updates here can go a long way toward boosting a property’s appeal.

Add simple decor touches

You don’t need a full redesign. Neutral decor, tasteful accents, and well-maintained outdoor spaces can create a polished look without overspending. For example, staging a US vacation home for sale might just mean updating linens, placing a few fresh plants, and ensuring outdoor areas are maintained.

Targeted marketing

Even the best-staged property won’t sell if the right buyers don’t see it. Professional photography, virtual tours, and online listings help your property stand out in a competitive market. This is where sellers gain an edge, especially if the property appeals to other Canadians exploring US real estate.

6. Have a strategy for currency exchange and repatriating your funds

Selling US property often leaves Canadians with large sums in US dollars. once the sale closes, the key consideration is how to convert and repatriate those funds to Canada. If you rely on a regular bank, hidden spreads and unfavourable exchange rates can reduce your proceeds by thousands.

That’s why an FX strategy is just as important as handling the tax and paperwork. Planning ahead allows you to monitor exchange rates, choose the right time to convert, and avoid unnecessary costs. Whether the funds come from a vacation home, an inheritance, or an investment property, the right FX partner ensures more of your money makes it back to Canada.

How MTFX protects the value of your proceeds

At MTFX, we specialize in large cross-border transfers. Whether it’s a snowbird selling a vacation home, an inheritance settlement, or a sale of a foreign investment property, the goal is the same: to protect the value of your proceeds when moving them back across the border. As a FINTRAC-regulated provider, we offer security, transparency, and competitive exchange rates that help you avoid the hidden costs common with traditional banks.

For Canadian residents selling property in the US, handling taxes is only part of the process. The other part is repatriating funds in a way that maximizes the value of your proceeds. With MTFX, you have the tools and expertise to time your transfers, manage exchange rates, and ensure more of your proceeds reach your Canadian account efficiently and without unnecessary loss.

Start your MTFX account today and simplify the process of selling US property. Transfer your funds with confidence at competitive rates and bring your money home the smarter way.

FAQs

1. What happens when a Canadian sells property in the US?

When a Canadian sells property in the US, the IRS collects capital gains tax first, often through FIRPTA withholding at closing. You must then report the sale to the CRA, where foreign tax credits usually prevent double taxation. Once taxes are settled, the final step is converting the proceeds and bringing money back to Canada.

2. Do Canadians have to pay tax in both the US and Canada when selling property?

Yes, both countries tax the sale, but Canada allows a foreign tax credit for US tax paid, preventing double taxation on the same gain.

3. What are the tax implications for Canadians owning US property?

The main tax implications include US capital gains tax when you sell, possible rental income tax while you own the property, and Canadian reporting of all worldwide income. Exchange rates also affect your Canadian tax calculation, since proceeds must be declared in CAD.

4. How much does FIRPTA withhold when Canadians sell US property?

By default, FIRPTA requires 15% of the gross sale price to be withheld at closing. If certain conditions apply, such as buyer-occupied residences under $1M, this rate can be reduced to 10% or even eliminated for lower-value sales.

5. What are the pros and cons of Canadians buying property in the US?

The pros include access to warmer climates, investment opportunities, and potential rental income. On the other hand, Canadians must navigate US tax laws, FIRPTA rules when selling, and the risk of currency fluctuations. If you’re considering this step, MTFX can make the financial side of buying property in the US easier by helping you transfer money at competitive rates.

6. How does currency exchange affect Canadians selling US property?

Exchange rates directly affect both your Canadian tax calculation and the final amount that reaches your account. Using a provider like MTFX with large transfer services helps preserve more of your proceeds than relying on banks.

7. How can Canadians avoid losing money when selling property abroad?

Beyond taxes, the biggest risk is in currency conversion. Traditional banks often include hidden fees or markups, while MTFX offers transparent pricing, competitive rates, and secure transfers. This ensures Canadians selling property abroad and bringing money to Canada don’t lose thousands in spreads.

Start your MTFX account today and simplify the process of selling US property. Transfer your funds with confidence at competitive rates and bring your money home the smarter way.