Travel Insurance

Buying a Condo in Florida?

Palm Trees
Written by Publishing Team

Palm trees

Canada has some of the harshest winters in the world, so it’s no surprise that most of us would love the opportunity to retreat to warmer destinations. Each year, Florida, Arizona, and other warmer U.S. Sunbelt destinations host a large number of Canadian “ice birds,” people who flock south when the mercury drops sharply to the north. According to a report by the Florida Department of Tourism, 3.6 million Canadians visited the Sunshine State in 2019 before the outbreak of the coronavirus pandemic.

For Canadians, the temptation to buy a property in the United States has never been greater as a vacation home and as a strategy to help diversify their investment portfolio. Between April 2020 and March 2021, Canadians bought $4.2 billion worth of US real estate, the National Association of Realtors reports. While the number is significantly lower than the previous year’s $9.5 billion, it shows that Canadians have continued to invest in US real estate, even amid widespread travel restrictions. In fact, Canadians have been the second largest group of foreign buyers of US residential real estate, after the Chinese, for several years in a row. Florida is the leading destination for Canadian buyers. Not surprisingly, other major states are also warm: Arizona, California, Texas, and Georgia.

However, if you wish to join the group of international real estate investors, you should consider career guidance for a thorough understanding of the planning implications. Here are six key factors that can help a potential US vacation buyer determine the financial consequences of ownership, and ensure an informed and informed decision is made.

1. Real Estate Financing

Many wealthy Canadians choose to buy US real estate right away. While mortgage financing is offered by banks on both sides of the border, cash transactions speed up the buying process through lower closing costs. Additionally, in many cases, the buyer may qualify for a discount on the price. However, these all-cash, no-mortgage transactions require professional advice to help clients deal with strict anti-money laundering laws and avoid any legal surprises.

2. Additional costs

Canadians are required to incur some additional costs to stay compliant with local regulations. For example, homeowners in the United States may need to have additional protections through risk insurance, and properties along storm paths may attract higher premiums.

Many Canadians who own vacation homes in the United States rent out part or all of their homes to cover real estate costs or to offset the cost of living in the United States. Carers, each of which may incur additional costs.

The better the preparation, the smoother the transition to a new lifestyle, and the richer the local experience.

3. Implications of property tax

International property taxes tend to be higher for foreign buyers and must be carefully calculated. In the United States, property taxes can jump significantly and are not audited when property values ​​decline. US laws impose a 30% withholding tax on your total rental income if a portion of your property is used for rental purposes. These taxes are collected by municipalities and local counties in the US states, and rates vary from jurisdiction to jurisdiction, as do methods for assessing property value.

There are other events that may result in your vacation property being taxed. For example, if you sell or gift the property during your lifetime or if you own property upon your death, tax can also be paid in such an event.

4. Cross-border tax planning

A carefully designed estate plan will help mitigate the punitive effects of cross-border taxes, prevent wealth erosion and the benefits of diversification. Canadians who spend four months annually in the United States will be considered residents and may be subject to US tax on their worldwide earnings. Here is a comprehensive guide to determine your residence in the United States under the basic presence test.

There are also cross-border filing obligations when Canadians sell property in the United States. A cross-border individual estate plan can effectively reduce your tax burden and ensure stress-free vacation.

5. Currency Valuation

Currency movements are not inherently harmful. If timed well, these swings can bring significant savings to international real estate transactions. A strong Canadian can enhance the exchange advantage for a Canadian buyer by lowering the cost of owning a foreign property.

When buying a snowbird property south of the border, Canadian investors should pay attention and consider planning. Talk to investment advisors who can provide customized financial advice on structuring the purchase and payment of a vacation home in the United States.

6. Health insurance

Canadians who want to spend a significant amount of time on their vacation property in the United States need to purchase overseas medical insurance from a private insurance company or major bank. While it is an important consideration in the best of times, the COVID-19 crisis has underlined the importance of having solid health coverage to meet the financial challenges of any health issues that arise during your stay in the United States.

For Canadians, health insurance policies that cover COVID-19 can be expensive. Some policies may have onerous terms and strict limits on the amount you will pay. You are advised to seek expert guidance and inquire of your insurance company specifically about the type of coverage offered for COVID-19 related illnesses and treatment. Some health policies may require an additional cost rider specific to COVID-19. There may be additional coverage terms, limits, and restrictions based on your vaccination status.


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