[yaplelynn]

I am a canadian citizen with rental property in the US. How am I taxed on rental income received from the US?

[Five Rings]

You will be taxed at 30% of the GROSS income of the rental property under treaty:

Article VI
Income from Real Property
1. Income derived by a resident of a Contracting State from real property (including income from agriculture, forestry or other natural resources) situated in the other Contracting State may be taxed in that other State.

2. For the purposes of this Convention, the term "real property" shall have the meaning which it has under the taxation laws of the Contracting State in which the property in question is situated and shall include any option or similar right in respect thereof. The term shall in any case include usufruct of real property, rights to explore for or to exploit mineral deposits, sources and other natural resources and rights to amounts computed by reference to the amount or value of production from such resources; ships and aircraft shall not be regarded as real property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting or use in any other form of real property and to income from the alienation of such property.

UNLESS, you elect to treat this income as a trade or business in the U.S.A. In that case you may deduct all your expenses and pay tax at graduated rates.

You will need to:
1. Get an Individual Tax Identification Number (ITIN). See http://www.irs.gov/pub/irs-pdf/fw7.pdf
You will attach to that application a certified copy of your passport, proof that you own the property, and a letter from your property manager (if any) indicating that he/she is collecting rents on your behalf.

2. After receiving your number you will complete Form W8-ECI and send it to your agent. See http://www.irs.gov/pub/irs-pdf/fw8eci.pdf and,
http://www.irs.gov/pub/irs-pdf/iw8eci.pdf

3. For the tax year in question you will file a 1040NR form and a schedule E detailing your expenses and depreciation. Depending on the State where the property is located you will most likely have State tax obligations also.

My advice to you is to secure the services of an able tax professional in the US.

[AtlantaTaxExpert]

Five Rings advice is absolutely correct.

If you need help filing your return and applying for an ITIN, email me at [email protected].