Let’s Talk Taxes: Canadians selling in AZ

It is recommended that you seek a professional for tax advice.  My intention is to try and answer in generalities and give you some topics to investigate further.

Whether you already own a property in Arizona and want to sell or you are considering a purchase here, there are some things to think about regarding taxation as a Canadian selling in Arizona.  Foreign Investment in Real Property Tax Act (FIRPTA)

  • If you plan on renting out your home here in AZ, you will be expected to pay a 30% income tax.
  • When you sell there is a Withholding Tax of 10% of the Gross Contract Price; however, you don’t have to pay if: the sale price (gross contract price) is less than $300,000 and the person to whom you are selling plans to use it as a primary residence
  • If your sales price is more than $300,000 then The Withholding Tax may be eliminated or reduced by filing an IRS form to obtain a Withholding Certificate.  This form needs to be filed before the closing of your sale.

**right now 2015 this form is taking from 90-120 days to receive**

Here is a link you may find helpful as a reference:http//www.irs.gov/pub/irs-pdf/p515.pdf

As well as seeking the advice from a US tax specialist, my research has also shown several things to be aware of on the Canadian side as well – beyond the scope of this blog, but certainly your specifics make your implications specific to you!

Things to know about buying either a Bank Owned Property or a Short Sale in AZ

The timelines can be quite different between buying a Bank Owned Property and a Short Sale: know what to expect.

A Bank Owned property is one that has already been foreclosed on and is now owned by the bank: the bank is the seller.

When you see the property you want, submit an offer. The bank will accept, counter or reject (usually about 3-5 business days). If they accept, you have your 7-10-day inspection period after which you can go ahead with the purchase or back out if you find anything that materially affects the value with which you are unsatisfied.

The home is purchased as is,if there is something hugely wrong like it needs new roof or A/C doesn’t work etc, bank may fix but the majority of the things the bank will not fix. You now have a few weeks to complete the purchase.

A Short Sale requires patience! The property owner is in a position of owing more on the mortgage than what the home is worth-the sale would fall “short” of the debt.

Banks want to recover as much as possible and that decision process is slow as they approve the seller for the short sale. You can expect to wait a minimum of 30-60 days before you even get a response to your offer. The bank will often counter your initial offer.

Once you receive bank approval from one or both of the lenders,(multiple lenders can slow the process further) you then proceed with the contract terms but usually have to close in a couple of weeks max. Short Sales are “as is” sales as well.

In both situations, the properties typically have some deferred maintenance that you will need to catch up on but is the reason you are getting the good pricing.