Can Americans Buy Property in Canada? Rules, Taxes, and the Foreign Buyer Ban

Americans can legally own property in Canada, and there is no citizenship requirement for land ownership in any province. But between a federal ban on foreign purchases of residential property (in effect through January 1, 2027), provincial foreign buyer taxes of 20% to 25% in BC and Ontario, and the tax obligations that follow the purchase, buying Canadian real estate as a non-resident is more complicated than it looks from a listing site. This guide covers the legal restrictions, the taxes on the buy, the taxes on the hold, and the taxes on the sell, from both the Canadian and US sides.

Can a US citizen buy a house in Canada?

Yes. Canada has no citizenship or residency requirement for owning real property. An American citizen, a US permanent resident, or any other foreign national can hold title to Canadian land. The restriction is on the purchase transaction, not on ownership itself, and it comes from a federal statute that took effect January 1, 2023.

The Prohibition on the Purchase of Residential Property by Non-Canadians Act (S.C. 2022, c. 10, s. 235) bans non-Canadians from purchasing residential property in Canada. The ban was originally set to expire January 1, 2025, then extended by two years to January 1, 2027. A “non-Canadian” under the Act is a foreign national (anyone who is not a Canadian citizen or permanent resident), a foreign corporation, or a Canadian corporation controlled by foreign interests.

The ban has exceptions. It does not apply to temporary residents who hold a valid work permit and meet prescribed conditions, protected persons (refugees), or a non-Canadian purchasing jointly with a spouse or common-law partner who is a Canadian citizen, permanent resident, or registered Indian. It also does not apply to non-residential property (commercial, industrial, agricultural) or to vacant land that is not zoned residential. If you are an American with a Canadian spouse who is a citizen or PR, the ban does not block your purchase.

Violating the ban carries a fine of up to $10,000, and a court can order the property sold. The Act authorizes the Minister to seek a court order for sale at fair market value, with the proceeds returned to the purchaser net of costs and penalties.

What taxes do foreign buyers pay when purchasing Canadian property?

The purchase itself can trigger provincial taxes that do not apply to Canadian residents. These are one-time charges assessed at the time of the property transfer, on top of the standard land transfer or property transfer tax that every buyer pays.

British Columbia charges an additional property transfer tax of 20% on the fair market value of a foreign buyer’s proportionate share of residential property in designated regions: Metro Vancouver, the Fraser Valley, the Capital Regional District (Victoria), the Central Okanagan (Kelowna), and the Regional District of Nanaimo. On a C$1,000,000 home in Vancouver, that is C$200,000 in additional tax, on top of the standard property transfer tax (which runs 1% on the first $200,000, 2% on $200,001 to $2,000,000, and 3% above that). The additional tax applies to the foreign buyer’s share, so if you purchase with a Canadian spouse, you pay it only on your portion.

Ontario charges a non-resident speculation tax (NRST) of 25% on the purchase price of residential property anywhere in Ontario. The NRST applies to foreign nationals, foreign corporations, and taxable trustees. If any one buyer on title is a foreign national, the tax applies to the full purchase price (not just that buyer’s share). On a C$800,000 house in Toronto, that is C$200,000 in additional tax, on top of Ontario’s standard land transfer tax and the City of Toronto’s municipal land transfer tax.

Other provinces do not currently impose a foreign buyer surcharge, though this can change. If you are buying property outside of BC’s designated regions and outside of Ontario, the foreign buyer premium does not apply.

Is rental income from Canadian property taxable in both countries?

Yes. If you rent out Canadian property as a non-resident of Canada, the rental income is taxable in Canada, and as a US person the same income is taxable on your US return, with a foreign tax credit for the Canadian tax paid.

Canadian side. Canada’s default treatment is a 25% non-resident withholding tax on the gross rent under ITA 212(1)(d). The tenant or property manager withholds and remits to the CRA. Gross rent means no deduction for mortgage interest, property taxes, maintenance, insurance, or depreciation. On C$3,000/month in rent, that is C$750/month withheld, even if expenses eat most of the income.

The alternative is a section 216 election. You (or your agent) file an NR6 form with the CRA before the rental year begins, undertaking to file a Canadian return for that year. The NR6 reduces the withholding to 25% of estimated net rental income (gross rent minus expenses), and the section 216 return reconciles the actual tax. This almost always produces a lower tax bill than the flat 25% on gross, because rental expenses are typically substantial.

US side. As a US person (citizen, green card holder, or US resident alien), you report the net Canadian rental income on Schedule E of your Form 1040. You claim a foreign tax credit on Form 1116 for the Canadian tax paid (whether that was the flat withholding or the tax assessed on the section 216 return). The credit usually offsets most or all of the US tax on the same income, so the total tax is approximately the Canadian rate.

What happens when I sell Canadian property as a non-resident?

Selling Canadian property as a non-resident triggers Canadian capital gains tax and a withholding mechanism that operates very differently from the US.

The buyer (or the buyer’s lawyer) must hold back 25% of the full sale price, not 25% of the gain, unless the seller obtains a section 116 clearance certificate from the CRA before or shortly after closing. The certificate is the CRA’s confirmation that the seller has paid or secured the tax on the gain, and once it issues, the holdback drops to 25% of the gain (or zero, if the tax is paid in full). Without the certificate, the buyer is personally liable for the 25% of the gross price under ITA 116(5), which is why every buyer’s lawyer insists on it.

The process: file Form T2062 (notice of disposition) with the CRA, pay 25% of the estimated gain as a deposit, and the CRA issues the certificate. The notice must be filed within 10 days after the disposition. Once the certificate issues, the buyer releases the holdback, and you file a Canadian return for the year of sale to reconcile the actual tax. The Canadian capital gains inclusion rate applies to the gain (currently 50% for the first $250,000 of net capital gains for individuals, 66.67% above that, effective June 25, 2024).

On the US side, you report the same gain on your US return and claim a foreign tax credit for the Canadian tax paid. The gain is calculated under US rules (which may differ from the Canadian calculation if you acquired the property before becoming a non-resident of Canada, because the cost base can differ). The treaty generally prevents double taxation through the Article XXIV foreign tax credit mechanism.

If you purchased the property as a personal-use home (not rented out), the principal residence exemption under ITA 40(2)(b) is generally not available to non-residents because the property must be “ordinarily inhabited” during the year by the taxpayer or their family. A cottage used seasonally by a non-resident who lives in the US does not qualify.

Do I have to report Canadian property on my US tax return?

The property itself is not reported on your US income tax return just because you own it. There is no US equivalent of Canada’s T1135 for foreign real property held for personal use. But several US reporting obligations can be triggered depending on how you use the property and what accounts are associated with it.

Rental income. If you rent the property, the net income is reported on Schedule E, as described above.

FBAR (FinCEN 114). A Canadian bank account you use to collect rent, pay expenses, or hold sale proceeds is a foreign financial account. If the aggregate value of all your foreign financial accounts exceeds $10,000 at any point during the year, you file an FBAR. The property itself is not reported on the FBAR, but the bank account is.

Form 8938 (FATCA). The same Canadian bank accounts may also trigger Form 8938 if the total value of your specified foreign financial assets exceeds $50,000 at year-end (or $75,000 at any point, for domestic filers; higher thresholds for those filing from abroad). Again, the real property is not itself a specified foreign financial asset, but the associated accounts are.

Capital gains on sale. When you sell, the gain is reported on Schedule D of your Form 1040, with the foreign tax credit for Canadian tax claimed on Form 1116.

If you hold the property through a Canadian corporation (which some buyers consider for liability or estate reasons), the entity itself triggers US reporting: Form 5471 (information return for US shareholders of a controlled foreign corporation), GILTI inclusion, and potentially Form 926 if you transferred cash to the corporation. Holding Canadian real estate in a Canadian corporation as a US person is almost never advisable because of the layered US anti-deferral rules. The US LLC trap guide covers the entity-choice problem from the other direction.

What should I do next?

If you are an American considering Canadian property, start with whether the federal foreign buyer ban applies to your situation (it runs through January 1, 2027, with exceptions for those purchasing with a Canadian spouse/partner or holding qualifying work permits). If the ban does not apply, factor the provincial foreign buyer taxes into your budget before making an offer. On the ongoing compliance, the biggest decision is whether you will rent the property (which triggers the section 216 election and Canadian return filing every year) or use it personally (which keeps you out of most Canadian compliance).

• Section 116 clearance certificate for selling Canadian property, the holdback mechanism and how to get the CRA certificate
• Buying Canadian property from a non-resident (buyer’s side), the section 116 obligations from the buyer’s perspective
• Canadian buying US property: the complete tax picture, the reverse direction for Canadians buying in the US
• FBAR vs Form 8938: do I file both?, the US reporting for the Canadian bank accounts associated with the property
• I’m American and moving to Canada, the broader tax picture for Americans relocating

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.