For Canadian residents buying a US rental, vacation or investment property
Canadians Buying US Real Estate: Should You Use an LLC?
Not automatically. A US LLC can suit some owners, but the IRS normally looks through a single-member LLC to its owner while the CRA treats it as a corporation, so the two countries can tax the same income differently. Compare owning personally, through an LLC and through a corporation before you buy. Gurleen Kaur, CPA licensed in British Columbia and Washington State, prepares the US returns and the Canadian T1 and T2. Based in Surrey, working with clients across Greater Vancouver, the rest of Canada and remotely.
Quick answer
Should a Canadian use an LLC to buy US real estate?
Not automatically. A single-member LLC is normally disregarded by the IRS (IRS), while the CRA treats a US LLC as a corporation. That mismatch can affect how your US tax lines up with your Canadian tax, so get the ownership options compared before you buy. An LLC is often considered for liability reasons, which is a legal question for a US real estate attorney. The right answer depends on your facts.
The usual ownership options
This is a high-level starting point, not a recommendation, and any of these can be combined. Which one fits depends on the property, the financing, how you will use it and your plans for selling.
| Ownership | How the US generally sees it | What to check for Canada |
|---|---|---|
| You personally | You are the owner. Rent is reported by you. | Rent is reported by you on your Canadian return, and US tax may be claimed as a foreign tax credit. |
| Single-member US LLC | Normally disregarded, so you are treated as the owner (IRS). A foreign-owned one also has Form 5472. | See the LLC mismatch. The CRA treats it as a corporation, so the two countries may not line up. |
| US corporation | A separate taxpayer with its own return. | Tax can arise at more than one level when money comes out to you. Compare this before choosing it. |
| US limited partnership | The partnership files Form 1065. It must also pay withholding tax on a foreign partner's share of income effectively connected with a US business, and give that partner Form 8805 (IRS). | Confirm how the CRA treats the exact entity before you buy, because the kind of partnership and the state can matter. Foreign reporting such as Form T1135 may apply. |
| Canadian holding corporation | A foreign corporation for the US. It can elect to treat all US real property income as effectively connected, and gain on a sale is treated that way too (IRS). The treaty limits the US branch tax on its US earnings to 5%, with a C$500,000 exemption (Article X(6)). | A Canadian-resident corporation files a T2. Tax can arise again when money comes out to you personally, so compare this with the other options. |
Why the LLC mismatch matters
In the US, a single-member LLC is normally ignored for income tax, so the income is treated as yours (IRS). In Canada, the same LLC is treated as a corporation, so the income may not be treated as yours in the same way. The Canada-US treaty has rules for income earned through fiscally transparent entities (Article IV), but they do not settle every result. This is why it is worth getting advice before the LLC is formed and the property is bought, not after. See US LLC for Canadian residents.
Rental income
By default, US rent earned by a nonresident can be taxed at 30% (or a lower treaty rate) with no deductions. You can choose to treat all income from US real property as effectively connected with a US business, which means filing Form 1040-NR and being taxed on net income (IRS Publication 519). Whether that choice suits you, and any state return, depends on your situation. In Canada, rental income is reported on Form T776 (CRA). See Canadians with US rental property.
Selling the property
When a foreign person sells US real property, the buyer generally must withhold 15% of the amount realized, and some exceptions apply (IRS). The withholding is collected at closing and is separate from working out the tax itself, so a US return usually follows. The sale can also have Canadian tax results. See FIRPTA withholding for Canadians.
US estate tax and Canadian reporting
- US estate tax. The estate of a nonresident who is not a US citizen may have to file Form 706-NA if US-situated assets exceed US$60,000 at death (IRS), and the treaty has rules on taxes at death (Article XXIX B). Do not assume that an LLC removes this exposure. See US estate tax for Canadians.
- Form T1135. Canadian residents report specified foreign property when its total cost is more than C$100,000. Personal-use property is not reported, but a property rented with a reasonable expectation of profit can count (CRA).
How we help
- Before you buy. We review your plans and give you a written comparison of the ownership options
- When you own it. We prepare the yearly filings for each property, on both sides of the border
- Both countries, one CPA. Gurleen prepares the US returns and the Canadian T1 and T2, so the two sets of filings stay aligned
- A fixed quote first. Everything is quoted after review, with a written scope before work begins
We handle the tax side. A US real estate attorney should advise on title, the LLC agreement and liability protection.
Common questions
Is an LLC always better for US property?
No. It can help with some goals, but it can also create a mismatch between how the IRS and the CRA treat the income. Compare it with owning personally and through a corporation.
Does an LLC protect me from US estate tax?
Do not assume that it does. Ask for this to be reviewed as part of the ownership comparison.
Do I have to file in the US if I only rent out one property?
Often, yes. The rules depend on how the rent is taxed and whether you make the choice to be taxed on net income. A state return may also apply.
Can you do both my US and Canadian returns?
Yes. Gurleen Kaur, CPA, prepares the US returns and the Canadian T1 and T2.
Do I need to form the LLC before I contact you?
No, and it is better to ask first. Changing the structure later can be harder than choosing it before you buy.
Do you do the legal work?
No. A US real estate attorney should advise on title, the LLC agreement and liability protection.
Sources
Every rule and figure on this page links to the IRS, CRA or other official source it comes from. Amounts change; we re-check them before each engagement.
- IRS: Single member limited liability companies
- IRS Publication 519, U.S. Tax Guide for Aliens
- IRS: Partnership withholding
- IRS: Instructions for Form 1120-F
- IRS: FIRPTA withholding
- IRS: Some nonresidents with US assets must file estate tax returns
- CRA: Questions and answers about Form T1135
- CRA: Form T776, Statement of Real Estate Rentals
- Department of Finance Canada: Canada-US Tax Convention (consolidated)
Gurleen Kaur, CPA licensed in British Columbia and Washington State. Last updated November 4, 2026. This page is general information, not tax or legal advice for your situation.
Related guides: US LLC for Canadian residents, US rental property, FIRPTA withholding, US estate tax.
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