Presentation: Buying U.S. vacation property

To make it easier to prepare materials for clients, we’ve developed these slide selections on the topic of buying a U.S. vacation property. The slides are designed to help you educate clients. We know you’ll want to customize them and add elements specific to your client, so we’re providing a Word file to make that easier.

Enjoy, and we hope this offering helps enhance your client meetings.

SLIDE 1

[title] Buying Vacation Property in the U.S. [subhead] A (brief) how-to guide

[advisor name] [official title] [address, etc.]

SLIDE 2

Many snowbirds dream of buying vacation property in the U.S.

[text slides in] But dreams and reality don’t always line up!

SLIDE 3

The truth: buying a U.S. property is a major financial decision

[text slides in] And it needs to be carefully considered

SLIDE 4

Pros of buying:

• often cheaper than renting year after year • your home, the way you want it • ability to put down roots • appreciating asset

SLIDE 5

Cons of buying:

• tied down to one place • ongoing maintenance • property taxes, insurance, etc. • U.S. taxes (if you rent it out) • may have to pay U.S. estate tax • real estate doesn’t always appreciate

SLIDE 6

If you decide to buy . . .

[text slides in] . . . you need to know how to do it

SLIDE 7

Working with a professional

[text slides in] Usually a good idea

[text slides in] They know the market; they know the opportunities; they know the rules

SLIDE 8

Securing a mortgage

[text slides in] Typically more difficult than in Canada

[text slides in] Working with a Canadian bank with U.S. affiliates is a very good idea

SLIDE 9

How should you own it?

[text slides in] Pick the ownership structure that suits your goals

SLIDE 10

Option 1: direct ownership

Owner holds property in “fee simple”

[text slides in] Pros: Easy to understand and administer

[text slides in] Cons: no tax protection

SLIDE 11

Option 2: trust

Owner creates trust; trust buys property

[text slides in] Pros: avoid probate fees; minimize U.S. estate taxes; protect heirs from creditors

[text slides in] Cons: costs to set up and administer

SLIDE 12

Option 3: partnership

Partnership buys and owns property

[text slides in] Pros: tax savings on rental income and capital gains; protection from creditors

[text slides in] Cons: there are costs to set up and administer

SLIDE 13

To rent or not to rent . . .

SLIDE 14

Myth: if I buy a vacation home, I can rent it out for extra income

[text slides in] Reality: the vacation rental business isn’t as easy as it looks

SLIDE 15

If you earn income from U.S. property, you must file a 1040NR, U.S. non-resident tax return

[text slides in] Even if you don’t owe any tax!

SLIDE 16

Tenants are required to withhold 30% of rent and remit it to IRS

[text slides in] You can claim this against taxes owing, but otherwise, there’s no exemption

SLIDE 17

Renting in the off season isn’t always easy (or profitable)

[text slides in] Who wants to be in Arizona in the middle of summer?

SLIDE 18

Closing costs

[text slides in] Generally the same as in Canada, except for title insurance

[text slides in] Can vary widely from state to state, so make sure to check

SLIDE 19

Operating costs (property taxes/insurance)

[text slides in] Property taxes can vary widely (Florida high; Arizona low)

[text slides in] Sometimes insurance isn’t available (Florida hurricanes)

SLIDE 20

Selling

If you sell, you’ll need to file a U.S. tax return and report any capital gains or losses [text slides in]

Agents/purchasers will withhold 10% of the proceeds and remit to the IRS [text slides in]

Any withholding tax can be applied against other taxes owing

SLIDE 21

Do you need to pay estate taxes?

Are your worldwide assets more than $5.34-million?

[text slides in] If so, you may have to pay U.S. estate tax on your U.S. assets

[text slides in] There are exemptions, and the math can be complicated

SLIDE 22

A final thought . . .

[text slides in] Only you can determine whether it makes sense

[text slides in] Ask yourself: which pros (and cons) are important to you?

SLIDE 23

Interested? I can help

[text slides in] • Professional expertise [text slides in] • Expert knowledge [text slides in] • Balanced, unemotional perspective

SLIDE 24

Thank You