Is 30% really taken off my US rental income, or can I elect out of it?

Yes. Rent from a US property pays a flat 30% of the gross to the IRS, with no deductions allowed against it, and that is the default for a Canadian who hasn’t elected. The section 871(d) election puts the same rent on a net basis at graduated rates, and the first election can usually still be made late, on a return for that year, original or amended. This is the US-property direction; a Canadian rental kept after moving to the US is the mirror, which runs on different rules.

Why is 30% coming off the whole rent?

Two provisions do it, and most published content quotes only half of the first. IRC 871(a)(1) imposes “a tax of 30 percent of the amount received from sources within the United States by a nonresident alien individual” as, among other items, “rents”. The paragraph then closes with a limiter sitting after subparagraph (D) that gets dropped constantly: “but only to the extent the amount so received is not effectively connected with the conduct of a trade or business within the United States”.

• No deductions against it. IRC 873(a) allows a nonresident alien’s deductions “only for purposes of section 871(b)”, so mortgage interest, property tax, insurance, management fees, repairs and depreciation do nothing against unelected rent. The section 873(b) exceptions cover casualty and theft losses on US property, charitable contributions and the personal exemption, with no rental expense on the list.
• No treaty rate either. Article VI, whose operative text is the Schedule II replacement, says income from real property situated in the other State “may be taxed in that other State”, and paragraph 3 extends that to “income derived from the direct use, letting or use in any other form of real property”. No rate cap sits in it for rents, so if you’re expecting a reduced treaty rate the way pensions get one, there isn’t one.

What does the section 871(d) election actually change?

The base, and with it the rate schedule. IRC 871(d)(1) lets a nonresident alien individual with income “from real property held for the production of income and located in the United States” elect to treat “all such income” as effectively connected with a US trade or business. Once it is, the limiter in 871(a)(1) switches the 30% off and the rent is taxed under section 871(b) on net income at graduated rates. It works even if you aren’t otherwise carrying on a US business, and it sweeps in every piece of your US real property at once.

	No election (the default)	With the section 871(d) election
Rate and base, together	30% of the gross rent received, under IRC 871(a)(1)	graduated rates on net rental income after allowed deductions, under IRC 871(b)
Deductions	none against this income, because IRC 873(a) allows a nonresident alien’s deductions only for section 871(b) purposes	mortgage interest, property tax, insurance, management, repairs and depreciation, each still needing to be connected with the US business income under IRC 873(a)
Are the two percentages comparable?	No, and this is the trap. 30% of a gross number and graduated rates on a net number sit on different bases, so lining the percentages up against each other gives a wrong answer	Same point from the other side: the election changes what the rate applies to, and which graduated rate lands on that smaller number is a separate question
Reported on	Schedule NEC (Form 1040-NR), line 6	Schedule E, then Schedule 1 line 5, then Form 1040-NR
Withholding	30% at source under IRC 1441(a), which names lessees and mortgagors among the withholding agents	stops once the payer holds a valid Form W-8ECI, under Reg 1.1441-4(a)(1) and (a)(2)(i), and not before; the annual US income tax return is still due, per the form’s own Note
Reversible?	n/a	Two tracks. While the time for making the election for that first year is still running, Reg 1.871-10(d)(1)(i) permits revocation without the Commissioner’s consent. Once that period has expired, Reg 1.871-10(d)(2)(i) keeps the election in effect for all subsequent taxable years, revocation needs the Commissioner’s consent on a written request inside 75 days of the year end, and a revocation made with that consent then bars a new election before the 5th taxable year beginning after the first year the revocation is effective, unless consent is given to that new election by the Commissioner

The election doesn’t reach property you aren’t holding to produce income. Reg 1.871-10(b)(2)(iii) puts outside it “income from real property, such as a personal residence, which is not held for the production of income”, so a vacation condo you keep for yourself is out of scope. Renting it by the week is its own question.

How do I make the election, and can I still fix past years?

You make it on the return, with a statement attached, and past years are very often still open. Reg 1.871-10(d)(1)(i) says the initial election may be made “at any time before the expiration of the period prescribed by section 6511(a)” for filing a claim for credit or refund, and that it “may be made without the consent of the Commissioner”. So a first election can go on the return for that year, original or amended, with nobody’s permission needed. The statement has to say that the election is being made, and then carry five items.

1. Every US property or interest in US property you hold as titular or beneficial owner.
2. How much of each you own, directly or beneficially.
3. Where each one is.
4. Any substantial improvements on it.
5. Any earlier year carrying a revocation or a new election.

That’s the regulation’s list. The 2025 Instructions for Form 1040-NR ask for eight items, adding the income from the property, the dates you owned it and the provision relied on, so treat those extra three as an IRS ask rather than a regulatory one. Item M on the form then has a checkbox for the first election year and another for later ones, so an election that stays in effect shows up annually. Checking that box isn’t the election, though. The statement is.

Which limb of the section 6511(a) period applies matters too, and the statute prints the years. A taxpayer who filed a return gets 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of those expires later. Where no return was filed by the taxpayer, it’s 2 years from the time the tax was paid, with no filing-based alternative to fall back on, which is what makes it the shorter route. A Canadian whose only US income is rent already withheld on has usually never filed a 1040-NR, so that last limb is the one to compute. That limb starts on the date IRC 6513(b)(3) treats the withheld tax as paid, which the next paragraph sets out.

Don’t measure that 2-year limb from the days the rent was withheld on, though. IRC 6513(b)(3) says that for purposes of section 6511, tax withheld at the source under chapter 3, which is the chapter section 1441 sits in, “shall, in respect of the recipient of the income, be deemed to have been paid by such recipient on the last day prescribed for filing the return under section 6012 for the taxable year (determined without regard to any extension of time for filing)”, meaning the year that tax is creditable to under IRC 1462. It adds that “any exemption granted under section 6012 from the requirement of filing a return shall be disregarded”, so a person who never had to file still has a date to measure from. That puts the start of the 2 years at the filing deadline for that year’s return, rather than at the payments themselves.

How do I stop the 30% withholding?

The payer stops it, and no IRS letter says so. IRC 1441(a) puts the duty on “all persons, in whatever capacity acting”, naming “lessees or mortgagors of real or personal property” among them, at 30% of the listed income, and 1441(b) names rent. IRC 1441(c)(1) lifts that duty for effectively connected income included in gross income under section 871(b)(2), and Reg 1.871-10(c)(1) routes elected income into that provision. Reg 1.1441-4(a)(1) then says no withholding is required. The return still comes: the form’s own Note requires an annual US income tax return.

• The Form W-8ECI goes to the withholding agent or payer, “Do not send to the IRS” in the form’s own words, with a separate one generally for each agent, and its header Note requires an annual US income tax return reporting the income claimed as effectively connected.
• Hand it over “before the payment is made”, credited or allocated. Without it, the instructions say the agent must withhold at the 30% rate.
• Line 7 asks for a US taxpayer identification number and marks it required, and Reg 1.1441-4(a)(2)(i) makes it a condition of the payer’s reliance.
• It stays valid from the day it’s signed through “the last day of the third succeeding calendar year”, unless a change in circumstances makes information on it incorrect, and that change has to reach the payer “within 30 days”.

Silence runs against you. Reg 1.1441-4(a)(2)(i) says that “in the absence of a reliable claim that the income is effectively connected … the income is presumed not to be effectively connected”, so a payer holding no certificate keeps taking the 30%. And keep the two acts apart: a W-8ECI stops withholding going forward, it doesn’t make the election. The election is made on the return.

What does depreciation do to my basis?

It comes off basis whether you claim it or not, which is what makes skipping it a pure loss. Reg 1.167(a)-10(a) says a taxpayer “should” deduct the proper depreciation allowance each year and “may not increase his depreciation allowances in later years by reason of his failure to deduct” it. So the Code doesn’t order you to depreciate. IRC 1016(a)(2) then adjusts basis by the amount “allowed” and “not less than the amount allowable”, with straight line supplying the figure where no method was adopted.

• The recovery period is an inference, not one quoted sentence. Reg 1.871-10(c)(2) subjects elected property to “the allowance for depreciation provided in section 167”, and section 167 by itself sets no period. Reaching the 27.5 years for residential rental property in IRC 168(c) runs through IRC 168(a) and 167(a)(2) too, so it’s a chain across three provisions.
• Being a nonresident doesn’t lengthen the period. The geographic test that could lengthen the period, IRC 168(g)(1)(A), turns on where the property is used, and a US condo is used in the US. Every “nonresident” in section 168(g) is “nonresidential real property”.

Straight line and the mid-month convention come off that same chain (IRC 168(b)(3)(B), 168(d)(2)(B)). Whether a unit let on short stays is residential rental property at all turns on the IRC 168(e)(2) definitions, and the short-stay guide owns that question.

The gain on the way out is its own guide, and the whole arc sits on the corridor page for Canadians buying US property.

What’s the catch if I want out later?

It depends on when you ask, because the regulation runs two tracks. While the section 6511(a) period for making the election for that first year is still open, Reg 1.871-10(d)(1)(i) lets you revoke it without the Commissioner’s consent. Once that period has expired, Reg 1.871-10(d)(2)(i) keeps the election in effect for all subsequent taxable years, and getting out then means asking the Secretary and being told yes.

• The consent-free track sits in the same subdivision as the late election, the one headed “Election, or revocation, without consent of Commissioner”: “having made the initial election, the taxpayer may, within the time prescribed for making the election for such taxable year, revoke the election without the consent of the Commissioner”, and if that revocation is timely and properly made he “may make his initial election under this section for a later taxable year without the consent of the Commissioner”. Taking it means filing “amended income tax returns, or claims for credit or refund, where applicable”. Whether IRC 871(d)(2)‘s lockout reaches a revocation of that kind isn’t resolved by the texts we have, so treat it as open.
• Permanence is conditional on that period closing, and it is the regulation that makes it conditional. IRC 871(d)(1) states it flat: an election “shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary with respect to any taxable year”. No open window is carved out of that sentence. The delegation that lets a regulation set one is IRC 871(d)(3), under which an election, “and any revocation of such an election, may be made only in such manner and at such time as the Secretary may by regulations prescribe”. So Reg 1.871-10(d)(2)(i) applies where the initial election was made and “the period prescribed by subparagraph (1)(i) of this paragraph for making the election for such taxable year has expired”, and the election then “shall remain in effect for all subsequent taxable years”, including years in which the taxpayer realizes no income from the property and years for which no return is required. Reg 1.871-10(a) makes the same point about the no-income years.
• Read what the 871(d)(3) delegation covers, though. It reaches the manner and the time of a revocation and says nothing about what a revocation costs, so it doesn’t settle whether IRC 871(d)(2)‘s 5-year bar catches a timely revocation made without the Commissioner’s consent. That one stays open.
• On the consent track, revocation runs on a written request filed “within 75 days after the close of the first taxable year for which it is desired to make the change”, specifying the grounds, with the consent then attached to the return.
• The regulation addresses that written revocation request to the “Director of International Operations, Internal Revenue Service”, an office that no longer exists under that name. We haven’t confirmed current routing, so we print no address. Check it before you rely on it.
• IRC 871(d)(2) then shuts the door for a while: after a revocation, “a new election may not be made under such paragraph for any taxable year before the 5th taxable year which begins after the first taxable year for which such revocation is effective, unless the Secretary consents to such new election.” Reg 1.871-10(d)(2)(i) ties its own version of that bar to an election “revoked with the consent of the Commissioner”. The Form 1040-NR instructions put the lockout more loosely, so work from the statute.

What should I do next?

Work out which years are still inside the section 6511(a) period, because that is the period the regulation measures the late election by, keyed to the time “for filing a claim for credit or refund”. It runs 3 years from the filing of a return or 2 years from the payment of the tax, whichever expires later, and 2 years from the payment alone where no return was filed. Under IRC 6513(b)(3) the withheld tax counts as paid on the filing deadline for the year it’s credited to, rather than on the days it came off the rent. Then there are three jobs, and they sit on separate clocks.

1. If the 30% has been coming off for a year or two, a first election can usually still go on a return for that year, original or amended, with the declaration and the five-item statement attached.
2. Get a Form W-8ECI to whoever pays you, so next year’s rent arrives whole. The form’s own Note says “Persons submitting this form must file an annual U.S. income tax return to report income claimed to be effectively connected with a U.S. trade or business”, so the return comes with it.
3. Then budget for the tax, because it is the withholding that stops and not the liability: that net rental income is taxed under IRC 871(b), with nothing withheld against it.

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